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Business in Action 6E By Courtland L. Bovee – Test Bank 

 

 

 

 

Chapter 1   Developing a Business Mindset 

 

1) Business is any profit-seeking organization that provides goods and services designed to satisfy customers’ needs.

 

2) Profit refers to the money the company brings in through the sale of goods and services.

 

3) Businesses add value by transforming lower-value inputs (like paper and ink) into higher-value outputs (like textbooks).

 

4) In a free-market economy, companies generally have limited autonomy in deciding which customers they want to focus on and how they want to compete.

 

5) A company has competitive advantage when its products are more appealing to its chosen customers.

 

6) Assets refer to the tangible economic resources owned by a firm.

 

7) A firm uses strategic sourcing techniques to reduce its costs. This is an example of barrier to entry.

 

8) Difficulty in obtaining business permits or licenses to do a particular business would be an example of a barrier to entry for a firm.

 

9) Intangible products have a physical presence.

 

10) The service sector now dominates the U.S. economy.

 

11)  A business mindset is a view of business that considers the various decisions a business has to make as well as the challenges that it must overcome in order to be successful.

 

12) Businesses can have both positive and negative effects on society.

 

13) Forces resulting from the practical application of science to a company’s products and processes would best describe its social environment.

 

14) A firm sets up a paper manufacturing factory in a country which has very strict regulations regarding disposal of industrial waste. This increases the cost of production of the firm. This is an example of the social environment of the firm.

 

15) The term stakeholders refers only to those people who have invested money in the company’s stock.

 

16) R&D fuels new ideas and designs for the company’s products and services that allow it to meet customer needs in competitive markets.

 

 

17) Mark, who works for a toy manufacturing firm, is responsible for creating a branding and marketing strategy. He is most likely to be a part of the firm’s operations management team.

 

18) In general, accounting managers are responsible for planning, while financial managers are responsible for monitoring and reporting.

 

19) Companies that sell shares of stock to the public are required to have their financial records audited by an outside accounting firm.

 

20) Claire holds the position of chief information officer (CIO) position at Celera Inc., a real estate company. Her position indicates that she is responsible for the preparation of income statements and balance sheets.

 

21) Internal auditors verify the work of the company’s accounting effort and look for opportunities to improve efficiency and cost effectiveness.

 

22) Unlike accounting tasks, for which there is a long tradition of outsourcing, the work of financial managers is generally kept “in house,” particularly in midsize and large companies.

 

23) Dependability includes meeting your commitments, such as staying on schedule and within budgets.

 

24) Etiquette is the quality of performing your job to the best of your ability and conducting yourself with purpose and pride.

 

25) True professionals avoid committing ethical lapses.

 

26) ________ is money that an organization brings in through the sale of its goods and services.

  1. A) Profit
  2. B) Revenue
  3. C) Sales
  4. D) Capital investment
  5. E) Finance

 

27) A/an ________ is a framework of how a business intends to generate revenue.

  1. A) business model
  2. B) strategic management tool
  3. C) profitability analysis
  4. D) competitive advantage
  5. E) entrepreneurial mindset

 

28) ________ is the term used to describe the difference between revenue and expenses.

  1. A) Revenue
  2. B) Interest
  3. C) Sales
  4. D) Owner’s equity
  5. E) Profit

 

29) ________ refers to some aspect of a product or company that makes it more appealing to target customers.

  1. A) Competitive advantage
  2. B) Economies of scale benefit
  3. C) Horizontal integration
  4. D) Vertical integration
  5. E) Barrier to entry advantage

 

30) Just Bakes, a bakery outlet in Cincinnati, is famous for the uniqueness of its bakery items, such as the baguette supreme, made from mixed-flour dough. The outlet also has an online ordering system that offers original gift baskets. Most of its target customers find it to be more appealing. In this example, Just Bakes has a(n) ________.

  1. A) economies of scale benefit
  2. B) barrier to entry advantage
  3. C) horizontal integration
  4. D) competitive advantage
  5. E) vertical integration

 

31) An organization that seeks to operate efficiently and effectively to achieve its goals without focusing on financial gains is a ________.

  1. A) business intermediary
  2. B) nonprofit organization
  3. C) service business
  4. D) government-owned corporation
  5. E) goods-producing business

 

32) Chicago Cinema Museum houses a unique collection of artifacts, memorabilia, and equipment that preserves the history and grandeur of cinema. It is funded by the government of the United States. The museum administrators apply many of the business-management principles to operate efficiently and effectively. The museum is most likely to be a ________.

  1. A) business intermediary
  2. B) nonprofit organization
  3. C) service business
  4. D) government-owned corporation
  5. E) goods-producing business

 

33) If individuals and companies believe they can pursue rewards without facing the risks that should be attached to those pursuits, they are more likely to engage in irresponsible and even unethical behavior. This situation is known as a(n) ________.

  1. A) ethical dilemma
  2. B) professionalism
  3. C) barrier to entry
  4. D) technological environment
  5. E) moral hazard

 

 

34) Lisa has a small language training business. She provides French and Spanish lessons to several customers in the neighborhood. What type of business does Lisa have?

  1. A) goods-producing business
  2. B) manufacturing business
  3. C) service business
  4. D) merchandising business
  5. E) not-for-profit organization

 

35) Island Woodworking is a small business owned by Robert M. Carrasco, who makes handcrafted tables and rocking chairs from exotic woods. Robert employs three other woodworkers to help him in creating custom-crafted furniture. Island Woodworking would be described as what type of business?

  1. A) goods-producing business
  2. B) labor-intensive business
  3. C) service business
  4. D) merchandising business
  5. E) not-for-profit organization

 

36) ________ value by performing activities that deliver some benefit to the customer, such as automotive repair, banking, health care and massage therapy.

  1. A) Goods-producing businesses
  2. B) Manufacturing businesses
  3. C) Service businesses
  4. D) Merchandising businesses
  5. E) Not-for-profit organizations

 

37) Businesses that need very large amounts of money, equipment, land and other material resources in order to get started and continue to operate are ________ businesses.

  1. A) service sector
  2. B) labor-intensive
  3. C) competitively-advantaged
  4. D) not-for-profit
  5. E) capital-intensive

 

38) A business that relies on human resources more than on buildings, machinery, material resources, and land would be a ________ business.

  1. A) capital-intensive
  2. B) labor-intensive
  3. C) not-for-profit
  4. D) competitively disadvantaged
  5. E) manufacturing

 

39) ________ refer to a resource or capability a company must have before it can start competing in a given market.

  1. A) Assets
  2. B) Economies of scale
  3. C) Barriers to entry
  4. D) Technological requirements
  5. E) Fixed costs

 

40) A firm finds it difficult to get started and establish itself in the car manufacturing industry because of high capital requirements, such as large amounts of money, manufacturing equipment, land, and a major marketing campaign. This exemplifies ________.

  1. A) competitive advantage
  2. B) barriers to entry
  3. C) market power
  4. D) business mindset
  5. E) vertical integration

 

41) A U.S. multinational retailer corporation wants to set up a chain of large discount department stores in a developing nation. However, it is hindered by strict licensing procedures and bureaucratic delays in obtaining government approvals. In this example, the multinational corporation faces ________.

  1. A) incumbent inertia
  2. B) economies of scale
  3. C) first-mover disadvantage
  4. D) free-rider effects
  5. E) barriers to entry

 

42) ________ refers to a view of business that considers the many decisions that must be made and the potential problems that must be overcome before the organization can deliver its products or services.

  1. A) Business mindset
  2. B) Service orientation
  3. C) Free-market philosophy
  4. D) Competitive advantage
  5. E) Business model

 

43) Which of the following statements is true regarding business mindset?

  1. A) It involves seeing the business from outside in.
  2. B) It is incompatible with corporate responsibility.
  3. C) It involves appreciating the challenges a company faces in satisfying customer needs.
  4. D) It involves acknowledging that businesses always benefit society.
  5. E) It involves ignoring one’s customer experiences.

 

44) Population trends that change the composition of consumer markets and the workforce are a part of a company’s ________ environment.

  1. A) economic
  2. B) regulatory
  3. C) cultural
  4. D) social
  5. E) political

 

45) All internal and external groups affected by a company’s activities are referred to as its ________.

  1. A) shareholders
  2. B) customers
  3. C) stakeholders
  4. D) employees
  5. E) suppliers

 

46) ________ refers to forces resulting from the practical application of science to innovations, products, and processes.

  1. A) Social trends
  2. B) Research and development
  3. C) Barriers to entry
  4. D) Technological environment
  5. E) Business mindset

 

47) A generational “bulge” in the population made up of people born between 1946 and 1964, called the Baby Boom generation, has occupied a large number of middle and upper management positions, frustrating younger professionals who would like to climb the company ladder. This is an example of the effect of ________ environment on businesses.

  1. A) economic
  2. B) social
  3. C) political
  4. D) legal
  5. E) regulatory

 

48) The conditions and forces that affect the cost and availability of goods, services and labor and shape the behavior of buyers and sellers are BEST described as the ________ environment.

  1. A) market
  2. B) regulatory
  3. C) legal
  4. D) economic
  5. E) social

 

49) The legal and regulatory environment would include ________.

  1. A) demographic factors
  2. B) technological innovations
  3. C) the number of competitors in the market
  4. D) preferences of the consumers
  5. E) the speed of obtaining licenses

 

50) The policies and practices of government bodies would shape the ________ environment for a business.

  1. A) legal and regulatory
  2. B) technological
  3. C) social
  4. D) economic
  5. E) market

 

51) Taxation, fees, efforts to coordinate multiple regulatory agencies, labor rules, environmental restrictions, protection for assets such as patents and brand names, roads and other infrastructure, and the transparency and consistency of decision making are a part of the ________ environment.

  1. A) economic
  2. B) market
  3. C) legal and regulatory
  4. D) political
  5. E) social

 

52) Which of the following is a component of the specific market environment within which each business operates?

  1. A) demographic factors
  2. B) competitors
  3. C) technological innovations
  4. D) environmental restrictions
  5. E) the speed of granting permits and licenses

 

53) ________ refers to a company’s target customers, the buying influences that shape the behavior of those customers, and competitors that market similar products to those customers.

  1. A) Regulatory environment
  2. B) Social environment
  3. C) Economic environment
  4. D) Market environment
  5. E) Technological environment

 

54) ________ activities are intended to identify new ideas that have the potential to result in new goods and services.

  1. A) Capital-intensive
  2. B) Regulatory
  3. C) Research and development
  4. D) Demographic
  5. E) Economic

 

 

55) Which of the following enables companies to design new and better ways to run their operations?

  1. A) process R&D
  2. B) legal and regulatory environment
  3. C) barriers to entry
  4. D) economies of scale
  5. E) market environment

 

56) Systems that promote communication and data usage through the company or allow it to offer new services to their customers are called ________.

  1. A) research and development (R&D)
  2. B) marketing strategies
  3. C) product engineering
  4. D) information technology (IT)
  5. E) forensic technology (FT)

 

57) ________ refers to the area where the company makes whatever it makes (for goods-producing businesses) or does whatever it does (for service businesses).

  1. A) Operations
  2. B) Finance
  3. C) Distribution
  4. D) Process R&D
  5. E) Marketing

 

58) The ________ function of an organization coordinates the incoming flow of materials and the outgoing flow of finished products.

  1. A) finance
  2. B) logistics
  3. C) human resource
  4. D) purchasing
  5. E) sales

 

59) Which of the following activities would be a part of facilities management?

  1. A) designing a new product
  2. B) devising a marketing strategy
  3. C) ensuring that the office building adheres to safety standards
  4. D) delivering the finished product to the customer
  5. E) maintaining demographic and contact details of potential customers

 

 

60) An operations manager is most likely to be responsible for ________.

  1. A) developing relationships with potential customers
  2. B) using social media to interact with customers
  3. C) helping to promote products to retailers
  4. D) creating branding and advertising strategies
  5. E) arranging to buy the necessary materials for manufacturing

 

61) Creating branding and advertising strategies to communicate with potential customers, and setting prices would fall under the ________ function of a business.

  1. A) human resource
  2. B) accounting
  3. C) logistics
  4. D) marketing
  5. E) research and development

 

62) FinSmart, a finance company, plans to construct a new office building which would be disabled-friendly. The company also plans to make renovations to the existing office buildings to incorporate changes that would make them safer and disabled-friendly. Which of the following persons is most likely to be in charge of planning the new buildings and maintaining them?

  1. A) sales manager
  2. B) facilities manager
  3. C) human resource manager
  4. D) logistics manager
  5. E) distribution manager

 

63) The ________ function of a business involves the recruiting, hiring and support of its personnel.

  1. A) operations
  2. B) finance
  3. C) human resources
  4. D) accounting
  5. E) information technology

 

64) Which of the following statements is true regarding business services?

  1. A) Business services refer to those functions of business that are performed by external firms.
  2. B) Business services refers to the in-house department of a company that is responsible for providing customer support.
  3. C) Business services creates the goods and services that a company can manufacture or perform for its customers.
  4. D) Business services is found more in labor-intensive firms, as compared to capital-intensive firms.
  5. E) Business services exist to help companies with specific needs in law, banking, real estate, and other areas.

 

65) Which of the following statements is true about the major functional areas in a business enterprise?

  1. A) An R&D function is an integral part of all businesses.
  2. B) Operations managers create branding and advertising strategies to communicate with potential customers.
  3. C) Accounting specialists work closely with other functional areas to ensure profitable decision making.
  4. D) Managers in finance and accounting functions remain uninvolved in the hiring and training process.
  5. E) Social media has resulted in customers being passive recipients of broadcast advertising messages rather than being participants in a multidirectional conversation with companies.

 

66) ________ audit the financial reports of public companies as required by law.

  1. A) Internal accountants
  2. B) External auditors
  3. C) Credit managers
  4. D) Management accountants
  5. E) Forensic accountants

 

67) ________ encompasses all the people and processes used to create the goods and perform the services that a company sells.

  1. A) Sales and marketing
  2. B) Information technology management
  3. C) Human resources management
  4. D) Operations management
  5. E) Financial management

 

68) An HR specialist is most likely to be responsible for which of the following activities?

  1. A) motivate and train diverse workforces
  2. B) production engineering
  3. C) design, implement, and maintain information systems
  4. D) lodge the annual tax returns for the company
  5. E) verify the financial reports of public companies

 

 

69) Which of the following statements is true regarding a sales professional?

  1. A) A career in sales is limited to the retail sector of professional selling.
  2. B) Personal characteristics are of little importance in the sales professional.
  3. C) A sales professional is responsible for determining long-term financial goals and budgets.
  4. D) A sales professional is responsible for building relationships with customers and helping them make purchase decisions.
  5. E) A sales professional does not receive any immediate indicators of success or failure.

 

70) Management accountant is likely to be responsible for which of the following activities?

  1. A) purchasing raw material for production
  2. B) assessing the manufacturing costs of new products
  3. C) determining the prices of products
  4. D) removing a distributor from the supply chain
  5. E) determining the money allocated for marketing

 

71) The manager of a firm was accused of diverting company funds for personal use. Andrew was the person responsible for reviewing his financial activities to see if any of the finances were diverted for personal use, and to determine if he had performed any financial crime. Andrew is most likely to be a(n) ________.

  1. A) forensic accountant
  2. B) chief information officer
  3. C) external auditor
  4. D) operations manager
  5. E) treasurer

 

72) Alvy Smith is the forensic accountant at KPM Financial Group, a company that provides investment services. He is most likely to do which of the following activities?

  1. A) establish the long-term financial goals and budgets of the firm
  2. B) purchase supplies required for the upkeep of the office premises
  3. C) determine the pricing of the services provided by the firm
  4. D) investigate charges of falsification of financial statements against an employee of the firm
  5. E) build relationships with customers and help them make purchase decisions

 

73) Which of the following positions would be responsible for establishing the long-term financial goals of the company, investing its funds and raising capital for the business?

  1. A) cash manager
  2. B) internal auditor
  3. C) chief information officer
  4. D) forensic accountant
  5. E) treasurer

 

74) ________ is the quality of performing at a high level and conducting oneself with purpose and pride.

  1. A) Business mindset
  2. B) Professionalism
  3. C) Job enrichment
  4. D) Positive reinforcement
  5. E) Etiquette

 

75) Which of the following statements is true about professionalism?

  1. A) Professionalism involves striving to excel in a single area, instead of attempting to excel at every level.
  2. B) Professionalism consists of working individually, rather than in a team.
  3. C) Professionalism involves prioritizing business goals over ethical considerations.
  4. D) Professionalism involves being accountable.
  5. E) Professionalism involves having the confidence to present opinions as facts.

 

 

76) Which of the following activities is most likely to be considered unprofessional?

  1. A) Viewing constant change as a positive thing, as a way to avoid stagnation and boredom.
  2. B) Being conservative with commitments.
  3. C) Helping others in the team to improve their performance.
  4. D) Posting critical comments regarding the employer in a personal blog.
  5. E) Providing practical information, when required.

 

77) Jason, a financial analyst in a computer manufacturing firm, is considered to be unprofessional by several of his co-workers and superiors. His manager feels that Jason is well meaning, however he is unable to communicate effectively. Which of the following tips is the manager most likely to give, to help Jason communicate more professionally?

  1. A) Give people general information, instead of providing only specific data.
  2. B) Clarify how people will benefit from responding to your messages the way you want them to.
  3. C) Present personal opinions as facts so that you appear professional.
  4. D) Avoid clarifying expectations and responsibilities to create a positive impression.
  5. E) Use passive listening so that you can save time and easily use your filters to process information.

 

78) The expected norms of behavior in a particular situation are referred to as ________.

  1. A) etiquette
  2. B) dependability
  3. C) expectancy
  4. D) energy
  5. E) accountability

 

79) Which of the following statements is true about etiquette?

  1. A) The rules of etiquette are easily understood and memorized.
  2. B) Etiquette means meeting your commitments, such as staying on schedule and within budgets.
  3. C) Etiquette blunders can have serious financial costs through lower productivity and lost business opportunities.
  4. D) It is preferable not to ask questions regarding the etiquette of a culture, as people will tend to become offended by your curiosity.
  5. E) Travel guidebooks are a poor source of information about etiquette in other countries.

 

80) Which of the following is an example of bad etiquette?

  1. A) Daniel indulged in excessive drinking during a company dinner.
  2. B) Alice was forced to take leave without prior notice due to a family emergency.
  3. C) Seth does not hesitate to express clearly what he expects from the interns working under him.
  4. D) Lisa, being a vegan, avoided having meat and milk-based dishes during a meeting with a client.
  5. E) Jason, an American who is about to go to a client’s office in Japan, refers to a travel guidebook to gather knowledge about the norms and customs prevalent in Japan.

 

81) Explain the concept of adding value to satisfy customers and provide an example.

 

82) Why are not-for-profit organizations different from most businesses? Are there any similarities between a goods-producing business and a not-for-profit organization?

 

83) Compare and contrast between goods-producing businesses and service businesses.

 

84) What is a barrier to entry? Explain with an example.

 

85) Compare and contrast between capital-intensive businesses and labor-intensive businesses.

 

86) Compare and contrast the perspective of a business professional with that of a consumer.

 

87) Discuss the positive and negative role of business in society.

 

88) Compare and contrast the social environment and the economic environment of a business.

 

89) Discuss the legal and regulatory environment of a business. How is it related to barriers to entry? What kind of legal and regulatory environment do most businesses prefer?

 

90) Compare and contrast the technological environment and the market environment within which a business operates?

 

91) Describe the six major functional areas in a business enterprise.

 

 

92) Compare and contrast the research and development and the operations functions of a business.

 

93) What are the functions of HR specialists and managers? How has the role of the HR function changed over time. Compare it with the functions of a chief information officer.

 

94) What is professionalism. List the key traits of professionalism.

 

95) Why is being a team player an important aspect of professionalism?

 

 

Chapter 2   Understanding Basic Economics

 

Business in Action, 6e (Bovee/Thill)

Chapter 2   Understanding Basic Economics

 

1) Economics is the study of how a society uses its scarce resources to produce and distribute goods and services to its citizens.

 

 

 

2) Macroeconomics studies economic behavior among consumers, businesses, and industries that collectively determine the quantity of goods and services demanded and supplied at different prices.

 

 

 

3) Capital includes land and minerals that a business needs in order to produce goods and services.

 

4) Capital is the collective intelligence of an organization.

 

 

5) Scarcity creates competition for resources, and forces trade-offs on the part of every participant in the economy.

 

 

6) Deciding how much money to spend on new manufacturing equipment versus launching a new advertising campaign is described as opportunity cost.

 

7) Capitalism is a term used to describe the free-market system, one in which private parties own and operate the majority of businesses and where competition, supply, and demand determine which goods and services are produced.

 

 

8) In practice, no economy is truly a free-market economy.

 

9) As social equality is a major goal of planned systems, private enterprise and the pursuit of private gain are encouraged.

 

10) By taking an ownership of 60% in General Motors in 2009, the U.S. nationalized the automaker.

 

 

11) Demand refers to the quantities of a good or service that producers will provide on a particular date at various prices.

 

 

12) The demand curve will shift to the left if the price of substitute products increases.

 

13) Movement along the supply curve typically slopes upward.

 

14) The supply curve of a firm will shift to the right if technology increases the firm’s production costs.

 

 

15) The point at which quantity of a good or service equals the quantity demanded is known as the equilibrium point.

 

 

16) The situation in which one supplier thoroughly dominates a market and essentially shuts out other competitors is called monopoly.

 

17) A deep and prolonged recession can be considered as a depression.

 

18) Frictional unemployment is caused by economic fluctuations.

 

 

19) Deflation is an economic condition in which prices fall steadily throughout the economy.

 

 

20) Cyclical unemployment is caused by a mismatch between workers’ skills and current employer needs.

 

21) Economic development zones, established by governments, offer a variety of financial incentives to businesses that meet specific job creation and local investment criteria.

 

 

22) Monetary policy involves changes in the government’s revenues and expenditures to stimulate a slow economy or dampen a growing economy that is in danger of overheating and causing inflation.

 

 

 

23) Sales taxes are the government’s largest single source of revenue.

 

 

24) Leading economic indicators suggest changes that may happen in the economy in the future.

 

 

25) GDP considers who is responsible for the production; GNP considers where the production occurs.

 

26) ________ is the study of how a society uses its scarce resources to produce and distribute goods and services.

  1. A) Anthropology
  2. B) Economics
  3. C) Proxemics
  4. D) Entrepreneurship
  5. E) Sociology

 

 

 

27) Microeconomics is the study of ________.

  1. A) the costs of production as a means of stimulating the economy and policies that raise capital and labour output by increasing the incentive to produce
  2. B) economic and financial data of the country by the application of mathematics and statistics
  3. C) the overall working of an economy in the society including its monetary and fiscal policies
  4. D) economic behavior among consumers, businesses, and industries that collectively determine the quantity of goods and services demanded and supplied at different prices
  5. E) a nation’s economic issues, such as the effect of government policies and the ownership of factors of production

 

28) The study of a country’s larger economic issues, such as how firms compete, the effect of government policies, and how an economy maintains and allocates its scarce resources, is known as ________.

  1. A) capitalism
  2. B) entrepreneurship
  3. C) microeconomics
  4. D) socialism
  5. E) macroeconomics

 

 

 

29) Which of the following refers to people and their individual talents and capacities?

  1. A) natural resources
  2. B) knowledge
  3. C) capital investments
  4. D) human resources
  5. E) entrepreneurship

 

 

30) The money, computers, machines, tools, and buildings that a business needs in order to produce its good and services are called ________.

  1. A) natural resources
  2. B) human resources
  3. C) capital
  4. D) knowledge
  5. E) entrepreneurship

 

31) ________ is the spirit of innovation, the initiative, and the willingness to take the risks involved in creating and operating businesses.

  1. A) Capitalization
  2. B) Socialization
  3. C) Merchandizing
  4. D) Automation
  5. E) Entrepreneurship

 

 

32) ________ is a concept that refers to the finite supply of resources.

  1. A) Redundancy
  2. B) Scarcity
  3. C) Deficit
  4. D) Stringency
  5. E) Shortage

 

33) A business owner has to decide whether the company should purchase new manufacturing equipment, open a new retail store in another city, or invest in a major advertising campaign. This decision to give up something to get something else is referred to as ________.

  1. A) resource development analysis
  2. B) an arbitrage
  3. C) demand/supply determination
  4. D) a trade-off
  5. E) factor analysis

 

34) A business owner has to decide whether the company should purchase new manufacturing equipment, open a new retail store in another city, or invest in a major advertising campaign. The value of the most appealing alternative that the business owner did not choose is its ________.

  1. A) break-even value
  2. B) decisional value
  3. C) opportunity cost
  4. D) factor analysis determination
  5. E) resource value

 

35) A ________ is an economic system in which individuals and companies are largely free to decide what products to produce, how to produce them, whom to sell them to, and at what price to sell them.

  1. A) planned system
  2. B) regulated economy
  3. C) socialist economy
  4. D) free-market system
  5. E) communist economy

 

36) The economic system of the U.S. is such that individuals own and operate the majority of businesses with limited economic intervention by the government. This is characteristic of a ________ economy.

  1. A) mixed
  2. B) planned
  3. C) capitalist
  4. D) free-market
  5. E) communist

 

37) Which of the following is characteristic of a country with a planned economic system?

  1. A) The economy relies chiefly on market forces to allocate goods and resources and to determine prices.
  2. B) The economic system combines private and state enterprises with limited intervention from the government.
  3. C) The economy subscribes to capitalistic competition, where private parties own and operate the majority of businesses.
  4. D) The economic system is primarily capitalistic but there is some degree of government ownership of the means of production.
  5. E) The economy is largely controlled by the government and freedom of choice is limited in order to accomplish government goals.

 

 

38) The economic system that allows individuals the least degree of economic freedom is ________.

  1. A) socialism
  2. B) communism
  3. C) capitalism
  4. D) authoritarianism
  5. E) mixed capitalism

 

39) In a country, the state owns all major productive resources from electricity to transportation. The country has very few opportunities for entrepreneurship and the economic classes are absent. The economy of this country is characterized by which of the following economic systems?

  1. A) anarchism
  2. B) communism
  3. C) capitalism
  4. D) socialism
  5. E) mixed

 

 

 

40) ________ lies somewhere between capitalism and communism, with a fairly high degree of government planning and some government ownership of capital resources.

  1. A) Totalitarianism
  2. B) Liberalism
  3. C) Authoritarianism
  4. D) Socialism
  5. E) Anarchism

 

41) In a country, the government owns many of the key industrial sectors, such as transportation, health care, and communications. Private ownership, however, is allowed in other industries. What type of economic system does this country have?

  1. A) communism
  2. B) capitalism
  3. C) free-market economy
  4. D) socialism
  5. E) totalitarianism

 

 

42) In 2008, the British government became the majority owner of the Royal Bank of Scotland, the second-largest bank in Britain, in an attempt to prevent the bank from collapsing. This is an example of ________.

  1. A) privatization
  2. B) anarchism
  3. C) capitalism
  4. D) nationalization
  5. E) socialization

 

43) Which of the following actions of the government indicates the privatization of an industry?

  1. A) allowing private businesses to operate in an industry that was previously operated by the government
  2. B) discouraging private business to operate in an industry that is critical for the growth of the economy
  3. C) acquiring the market leader to gain control of the industry and its resources
  4. D) imposing taxes on scarce raw materials to discourage unfair pricing by its suppliers
  5. E) imposing regulations on multinational businesses to protect local businesses

 

 

44) The U.S. government’s use of Blackwater Security Consulting, a military security company, to guard officials and military installations in Iraq is an example of ________.

  1. A) privatization
  2. B) nationalization
  3. C) capitalization
  4. D) socialization
  5. E) communism

 

45) ________ refers to the amount of a good or service that customers will buy at a given time.

  1. A) Demand
  2. B) Utility
  3. C) Equilibrium
  4. D) Necessity
  5. E) Want

 

 

 

46) ________ refers to the quantities of a good or service that producers will provide on a particular date at various prices.

  1. A) Necessity
  2. B) Supply
  3. C) Demand
  4. D) Utility
  5. E) Want

 

47) A(n) ________ is a graph showing the relationship between the amount of product that buyers will purchase at various prices, all other factors being equal.

  1. A) supply curve
  2. B) inflation rate
  3. C) demand curve
  4. D) deflation rate
  5. E) competitive balance

 

48) Demand curves typically slope downward. This implies that a(n) ________.

  1. A) decrease in price will increase the quantity demanded
  2. B) decrease in price will decrease the quantity demanded
  3. C) increase in price will increase the quantity demanded
  4. D) decrease in price will have no effect on quantity demanded
  5. E) increase in price will have no effect on quantity demanded

 

49) If consumer demand for a product decreases, the demand curve ________.

  1. A) moves downward
  2. B) moves upward
  3. C) moves to the right
  4. D) moves to the left
  5. E) remains stationary

 

 

50) The ________ depicts the relationship between prices and quantities that sellers will offer for sale, regardless of demand.

  1. A) demand curve
  2. B) supply curve
  3. C) equilibrium point
  4. D) business cycle
  5. E) competitive analysis

 

51) Movement along the supply curve typically slopes upward because ________.

  1. A) the amount of government regulation in an industry rises with increase in demand
  2. B) the quantity that the sellers are willing to supply rises with decrease in demand
  3. C) the amount of government regulation in an industry rises with increase in price
  4. D) the quantity that the sellers are willing to supply rises with increase in government regulation
  5. E) the quantity that the sellers are willing to supply rises with increase in price

 

 

52) The point at which the demand and supply curves intersect – the point at which the quantity demanded and supplied are equal – is called the ________.

  1. A) equilibrium point
  2. B) aggregation point
  3. C) marginal point
  4. D) break-even point
  5. E) distribution point

 

53) Colonel’s Burgers sells 2500 of its flagship burger, Colonel’s Treat, each month at a price of $10 each. The customers are willing to buy 2500 Colonel’s Treat burgers each month at the same price. Hence, the price of $10 per burger is the ________.

  1. A) sunk cost
  2. B) break-even price
  3. C) equilibrium price
  4. D) opportunity cost
  5. E) incremental cost

 

 

54) ________ is a situation in which no single firm is large enough to influence prices and distort the workings of the free-market system.

  1. A) Pure monopoly
  2. B) Pure monopsony
  3. C) Pure competition
  4. D) Regulated monopoly
  5. E) Stabilized monopoly

 

55) Which of the following is a distinct characteristic of a pure monopolistic economy?

  1. A) many small suppliers, with virtually identical products.
  2. B) small number of suppliers with products, which can be distinguished in important ways
  3. C) only one supplier, with monopoly granted by government mandate
  4. D) only one supplier, with monopoly achieved by innovation and specialization
  5. E) few suppliers, with products that can be distinguished but are similar enough to be replacements

 

 

56) Due to government mandate, only one company has the exclusive right to provide electricity in all the cities of Borgia. This is an example of a ________.

  1. A) pure competition
  2. B) pure monopoly
  3. C) regulated monopoly
  4. D) monopolistic competition
  5. E) regulated monopsony

 

 

57) There are 10 pizza restaurants in a city. Each restaurant claims to have the “best pizza in town” and advertises the ways in which its pizza is different and better than its competitors’ pizzas. This is an example of a(n) ________.

  1. A) regulated monopoly
  2. B) monopsony
  3. C) regulated monopsonic competition
  4. D) monopolistic competition
  5. E) monopoly

 

 

58) Which of the following is true of the pricing in a market of monopolistic competition?

  1. A) No single firm can grow large enough to influence prices across the market.
  2. B) Firms that excel in one or more aspects can gain some control over pricing.
  3. C) All firms have considerable control over pricing.
  4. D) Suppliers have total control over the pricing of products.
  5. E) Prices are set by government mandate.

 

59) When the number of competitors in a market is quite small, a situation known as ________ is created.

  1. A) monopoly
  2. B) monopsony
  3. C) oligopoly
  4. D) monopolistic competition
  5. E) pure competition

 

60) Which of the following is a characteristic feature of economic contraction?

  1. A) decreased unemployment rates
  2. B) decreased consumer spending
  3. C) increased income
  4. D) increased employment
  5. E) increased demand

 

61) ________ is defined as having two consecutive quarters of decline in the country’s gross domestic product.

  1. A) Deflation
  2. B) Stagnation
  3. C) Immobilism
  4. D) Stagflation
  5. E) Recession

 

 

62) A deep and prolonged recession is known as a(n) ________.

  1. A) contraction
  2. B) stagnation
  3. C) deflation
  4. D) immobilism
  5. E) depression

 

63) When a downward swing or recession is over, the economy enters into a period of ________.

  1. A) recovery
  2. B) depression
  3. C) contraction
  4. D) stagnation
  5. E) immobilism

 

64) ________ unemployment is the natural movement of workers into and out of jobs, such as when a person quits one job without first lining up a new job.

  1. A) Structural
  2. B) Intrinsic
  3. C) Frictional
  4. D) Cyclical
  5. E) Seasonal

 

65) When demand for goods and services drops, businesses reduce production, thereby requiring fewer workers. The unemployment resulting because of this phenomenon is known as ________ unemployment.

  1. A) intrinsic
  2. B) cyclical
  3. C) structural
  4. D) seasonal
  5. E) frictional

 

66) Workers in a country are unable to find jobs that match their qualifications and the employers are unable to find employees with the skills required to perform the job. This has led to ________ unemployment in this country.

  1. A) frictional
  2. B) seasonal
  3. C) structural
  4. D) cyclical
  5. E) intrinsic

 

67) Which of the following types of unemployment is common in industries with predictable increases and decreases in customer demand?

  1. A) structural
  2. B) frictional
  3. C) intrinsic
  4. D) seasonal
  5. E) cyclical

 

 

68) ________ is a steady rise in the average prices of goods and services throughout the economy.

  1. A) Recession
  2. B) Depression
  3. C) Deflation
  4. D) Inflation
  5. E) Arbitration

 

69) Inflation is a major concern for consumers, businesses, and government leaders because it ________.

  1. A) is a precursor to recession
  2. B) decreases the purchasing power of consumers
  3. C) decreases the production costs
  4. D) increases the demand for commodities
  5. E) decreases the opportunity cost of holding cash balances

 

 

70) Which of the following is an example of deregulation?

  1. A) lifting redundant restrictions on airline competition
  2. B) banning the sale of tobacco to minors under the age of 18
  3. C) lowering the speed limit on an interstate highway
  4. D) approving a proposed merger between Google and Microsoft
  5. E) establishing economic development zones to attract new businesses

 

71) The Federal Trade Commission (FTC) is charged with which of the following duties?

  1. A) overseeing communication by telephone, telegraph, radio, and television
  2. B) regulating and overseeing carriers engaged in interstate transportation
  3. C) enforcing laws and regulations to prevent distribution of harmful foods and drugs
  4. D) protecting the national transportation infrastructure
  5. E) enforcing laws regarding unfair business practices and deceptive advertising

 

72) ________ laws limit what businesses can and cannot do to ensure that all competitors have an equal chance of succeeding.

  1. A) Fiscal
  2. B) Discrimination
  3. C) Antitrust
  4. D) Stabilization
  5. E) Equilibrium

 

73) ________ policy involves adjusting the nation’s money supply by increasing or decreasing interest rates.

  1. A) Fiscal
  2. B) Taxation
  3. C) Cyclical
  4. D) Antitrust
  5. E) Monetary

 

 

74) ________ policy involves changes in the government’s revenues and expenditures to stimulate a slow economy or dampen a growing economy that is in danger of overheating and causing inflation.

  1. A) Fiscal
  2. B) Taxation
  3. C) Cyclical
  4. D) Antitrust
  5. E) Monetary

 

75) ________ taxes, levied on the earnings of individuals and businesses, are the government’s largest single source of revenue.

  1. A) Income
  2. B) Property
  3. C) Sales
  4. D) Excise
  5. E) Payroll

 

 

 

76) ________ taxes, levied on retail purchases made by customers, are collected by retail businesses at the time of the sale and then forwarded to state governments.

  1. A) Income
  2. B) Property
  3. C) Sales
  4. D) Excise
  5. E) Payroll

 

77) ________ taxes are implemented, in part, to help control potentially harmful practices, on selected items such as gasoline, tobacco, and liquor.

  1. A) Income
  2. B) Property
  3. C) Sales
  4. D) Excise
  5. E) Payroll

 

78) ________ taxes are levied on earnings of individuals to help fund Social Security, Medicare, and unemployment compensation.

  1. A) Excise
  2. B) Payroll
  3. C) Sales
  4. D) Income
  5. E) Property

 

79) Retail sales, on the day after Thanksgiving, are usually a good indicator of overall retail sales for the Christmas season. This is an example of a ________ indicator.

  1. A) leading
  2. B) conversionary
  3. C) lagging
  4. D) current
  5. E) latent

 

 

80) In early December, it was reported that housing rates in October 2010 were at its 6-month low, which resulted in increased home purchases. This is an example of a ________.

  1. A) leading indicator
  2. B) conversionary indicator
  3. C) lagging indicator
  4. D) current indicator
  5. E) latent indicator

 

81) The ________ measures the rate of inflation by comparing changes in the prices of a representative basket of goods and services such as clothing, food, housing, and utilities.

  1. A) gross domestic product (GDP)
  2. B) producer price index (PPI)
  3. C) inflationary stability index (ISI)
  4. D) consumer price index (CPI)
  5. E) economic stimulus index (ESI)

 

 

82) The ________ measures price at the producer or wholesaler level, reflecting what businesses are paying for the products they need.

  1. A) gross domestic product (GDP)
  2. B) producer price index (PPI)
  3. C) inflationary stability index (ISI)
  4. D) consumer price index (CPI)
  5. E) economic stimulus index (ESI)

 

83) The ________ measures a country’s output – its production, distribution, and use of goods and services – by computing the sum of all goods and services produced for final use in a country during a specified period.

  1. A) gross domestic product (GDP)
  2. B) producer price index (PPI)
  3. C) gross national product (GNP)
  4. D) consumer price index (CPI)
  5. E) economic stability index (ESI)

 

 

 

84) While gross domestic product (GDP) considers where the production occurs, ________ considers who is responsible for the production.

  1. A) human development index (HDI)
  2. B) producer price index (PPI)
  3. C) gross national product (GNP)
  4. D) consumer price index (CPI)
  5. E) economic stability index (ESI)

 

85) What is economics? Compare and contrast between microeconomics and macroeconomics.

 

86) Explain the different factors of production.

 

87) Compare and contrast between trade-offs and opportunity costs.

 

88) Compare and contrast between free-market systems and planned systems.

 

89) Is there such a thing as a “free” economy? Elucidate your views.

 

90) What type of economic system lies between capitalism and communism? Explain why it is more effective than other economic systems.

 

91) Explain, with the help of an example, why socialism and capitalism are not mutually exclusive.

 

92) In recent years, why have the governments of various countries both nationalized and privatized some of their services?

 

93) List the major factors that affect the overall demand of a product.

 

94) “As the supply and demand curves are dynamic, so is the equilibrium point.” Explain this statement with an example.

 

95) How does capitalism promote monopolistic competition in the market?

 

96) Differentiate between structural and cyclical unemployment.

 

 

97) Compare and contrast between monetary and fiscal policies.

 

98) Explain the meaning of a leading indicator with the help of an example.

 

99) Explain three commonly known price indexes.

 

 

Chapter 3   The Global Marketplace

 

Business in Action, 6e (Bovee/Thill)

Chapter 3   The Global Marketplace

 

1) Economies of scale are savings from not buying too much of any one thing.

 

 

2) Comparative advantage theory states that countries should produce and sell to other countries those things it can produce most efficiently.

 

 

3) A country’s balance of trade is the total value of its imports less the total value of its exports.

 

4) A country that imports more than it exports would have a trade surplus.

 

5) The number of units of one currency that must be exchanged for a unit of the second currency is known as the exchange rate between the currencies.

 

 

6) Strong dollar will lower the cost of goods that the U.S. exports.

 

 

7) International travel would be more expensive for U.S. residents if the dollar is strong.

 

8) Trade that takes place without interferences is known as free trade.

 

9) Tariffs are politically motivated restrictions that revoke a company’s normal trade relations status.

 

 

10) An embargo is a complete ban on the import or export of certain products or even all trade between certain countries.

 

 

11) Export subsidies are a form of financial assistance given to exporters.

 

12) The World Trade Organization is a permanent forum for negotiating, implementing, and monitoring international trade procedures.

 

13) Providing short-term loans to countries that are unable to meet their financial obligations is a primary function of the International Monetary Fund.

 

 

14) The World Bank is an agency of the U.S. federal government.

 

15) The North American Free Trade Agreement was formed by twelve North American countries.

 

 

16) The European Union has created a currency of its own.

 

17) Culture is a shared system of symbols, beliefs, attitudes, values, expectations, and norms for behavior.

 

 

18) Ethnocentrism is the tendency to assign a wide range of generalized attributes to an individual.

 

19) The legal systems in the United States and the United Kingdom are based on civil law.

 

 

20) Theocratic law is law based on religious principles.

 

21) All U.S. companies are bound by the Foreign Corrupt Practices Act.

 

 

22) Exporting is the least risky form of international business activity.

 

 

23) Joint ventures are short-term partnerships between two or more companies to jointly develop, produce, or sell products.

 

 

24) A company creates highly independent operating units in each new country when using the multidomestic strategy.

 

25) Managerial control with the global strategy is highly decentralized.

 

26) The classic theory of comparative advantage suggests that each country should ________.

  1. A) attempt to maintain a trade surplus by exporting more than what it imports
  2. B) attempt to maintain a trade deficit by importing more than what it exports
  3. C) produce all goods and services it requires for domestic consumption
  4. D) specialize in those areas where it can produce more efficiently than other countries
  5. E) produce a wide range of products to maintain an attractive international portfolio

 

 

27) Brazil is said to have a(n) ________ in coffee beans because it can produce coffee beans more efficiently than other countries.

  1. A) credit advantage
  2. B) balance of trade
  3. C) trade surplus
  4. D) trade deficit
  5. E) comparative advantage

 

28) A company benefits from economies of scale when it ________.

  1. A) does not use centralization of production and distribution
  2. B) produces goods or services in multiple locations
  3. C) adopts a highly differentiated marketing strategy
  4. D) engages in the production of personalized products
  5. E) manufactures and distributes products in higher quantities

 

 

29) A country has a trade surplus when the ________.

  1. A) value of its exports exceeds the value of its imports
  2. B) exchange rate of its currency with other currencies is variable
  3. C) exchange rate of its currency with other currencies is fixed
  4. D) value of its imports exceeds the value of its exports
  5. E) total flow of money into the country equals the total flow of money out of the country

 

30) A country has a trade deficit when the ________.

  1. A) exchange rate of its currency with other currencies is fixed
  2. B) exchange rate of its currency with other currencies is variable
  3. C) value of its exports exceeds the value of its imports
  4. D) total flow of money into the country equals the total flow of money out of the country
  5. E) value of its imports exceeds the value of its exports

 

31) A country’s balance of payment equals the ________.

  1. A) money spent on procuring services minus money spent on procuring goods
  2. B) total flow of money into the country minus the total flow of money out of the country
  3. C) gross domestic product of the country minus the gross national product of the country
  4. D) money spent on producing services minus money spent on producing goods
  5. E) money spent on buying goods minus money spent on producing goods

 

32) The number of units of one currency that must be exchanged for a unit of the second currency is known as the ________ between the currencies.

  1. A) balance payment
  2. B) trading bloc
  3. C) tariff rate
  4. D) exchange rate
  5. E) trade balance

 

 

33) On a vacation to Italy, you exchange $100 to get 70 Euros in return. This amount is significantly lower than what you received last year. This indicates that the ________.

  1. A) U.S has a trade surplus against Italy
  2. B) Euro has depreciated in value recently
  3. C) U.S. dollar has weakened in the past year
  4. D) U.S has a trade deficit against Italy
  5. E) balance of payment between U.S. and Europe is unfavorable

 

34) The exchange rate of Euro and Yen, in two consecutive years, against U.S. dollars is given below:

Year    1 dollar equaled:         1 dollar equaled:

2010    0.68 Euro        81 Yen

2011    0.77 Euro        75 Yen

 

Which of the following is a valid conclusion that you can derive from this information?

  1. A) The U.S. dollar weakened against the Euro in 2011.
  2. B) The U. S. dollar was stronger against the Euro in 2010.
  3. C) The Euro has strengthened against the Yen in 2011.
  4. D) The U.S. dollar weakened in 2011 against the Yen.
  5. E) The U. S. dollar was weaker against the Yen in 2010.

 

 

35) When the U.S. dollar is strong, U.S. exports will likely ________.

  1. A) become more competitive in foreign markets
  2. B) cost more in other countries
  3. C) be limited by the U.S. government
  4. D) face embargoes in developing nations
  5. E) be restricted by governments across the world

 

36) Which of the following changes in the exchange market is beneficial to Charles Associates?

  1. A) The U.S. dollar has strengthened against the Rupee.
  2. B) The U.S. dollar has strengthened against the Renminbi.
  3. C) The U.S. dollar has strengthened against the Euro.
  4. D) The Yen has become weak against U.S. dollars.
  5. E) The Euro has become strong against U.S. dollars

 

 

37) Which of the following changes in the exchange market is disadvantageous to Charles Associates?

  1. A) The U.S. dollar has weakened against the Renminbi.
  2. B) The U.S. dollar has strengthened against the Rupee.
  3. C) The U.S. dollar has strengthened against the Euro.
  4. D) The Yen has become strong against U.S. dollars.
  5. E) The Euro became weaker against most major currencies.

 

38) Which of the following arguments supports the idea of free trade?

  1. A) Dumping rules and tariffs should be stricter in developing countries.
  2. B) International trade must take place without any interference.
  3. C) Organizations should prefer local workers to foreign workers.
  4. D) Local businesses should obtain help from governments.
  5. E) Governments should subsidize exporters to promote global trade.

 

39) Trade that takes place without governmental interferences is known as ________.

  1. A) subsidized trade
  2. B) protected trade
  3. C) illegal trade
  4. D) free trade
  5. E) moderated trade

 

40) Which of the following is an objective of protectionism?

  1. A) reducing the purchasing power of individuals
  2. B) guard specific industries in a nation
  3. C) enhancing trade between nations
  4. D) increasing foreign direct investment
  5. E) helping developing nations engage in global trade

 

 

41) Which of the following is a main feature of protectionism?

  1. A) high levels of risks for domestic industries
  2. B) increased risk for local workers
  3. C) compromise on national security
  4. D) governmental intervention in trade
  5. E) formation of trade blocs between nations

 

42) Taxes, surcharges, or duties levied against imported goods are known as ________.

  1. A) import sanctions
  2. B) embargoes
  3. C) tariffs
  4. D) import quotas
  5. E) restrictive import standards

 

 

43) China imposes duties on automobiles imported to China. This is an example of a(n) ________.

  1. A) import sanction
  2. B) tariff
  3. C) import quota
  4. D) embargo
  5. E) restrictive import standard

 

44) ________ limit the amount of particular goods that countries allow to be imported during a given year.

  1. A) Import subsidies
  2. B) Embargoes
  3. C) Import quotas
  4. D) Import tariffs
  5. E) Restrictive import standards

 

45) The U.S. restricts the import of peanuts to a maximum of 1.7 million pounds per year to protect the price that domestic producers can charge. This is an example of a(n) ________.

  1. A) import subsidy
  2. B) embargo
  3. C) import quota
  4. D) import tariff
  5. E) restrictive import standard

 

46) An embargo is a ________.

  1. A) quantity restriction on the import of particular goods or services
  2. B) surcharge imposed on import of certain products
  3. C) subsidy offered to products exported from a country
  4. D) complete ban on the import or export of certain products
  5. E) form of financial assistance extended to domestic producers

 

 

47) The United States has banned the export of super-computers and lasers to non-allies. This is an example of a(n) ________.

  1. A) export subsidy
  2. B) export quota
  3. C) tariff
  4. D) embargo
  5. E) restrictive import standard

 

48) When France wanted to reduce video cassette recorder (VCR) imports, it established elaborate procedures for importers to obtain customs clearances on shipments of VCRs and required importers to obtain special licenses to import these products. This is an example of a(n) ________.

  1. A) export subsidy
  2. B) embargo
  3. C) import quota
  4. D) tariff
  5. E) restrictive import standard

 

 

49) ________ are a form of financial assistance in which producers receive enough money from the government to allow them to lower their prices.

  1. A) Export subsidies
  2. B) Embargoes
  3. C) Tariffs
  4. D) Sanctions
  5. E) Export quotas

 

50) Dumping ________.

  1. A) involves selling a product at a price lower than the cost of production
  2. B) is a strategy used by firms to enter an industrialized nation
  3. C) refers to the practice of selling products in small quantities
  4. D) is a strategy used by organizations to enter a developed market
  5. E) is typically prevented by providing export subsidies to local producers

 

 

51) ________ are politically motivated embargoes that revoke a country’s normal trade relations status.

  1. A) Subsidies
  2. B) Tariffs
  3. C) Sanctions
  4. D) Quotas
  5. E) Restrictive standards

 

52) ________ is a permanent forum for negotiating, implementing, and monitoring international trade procedures and for mediating trade disputes among its more than 150 member countries.

  1. A) International Monetary Fund
  2. B) World Trade Organization
  3. C) World Bank
  4. D) European Union
  5. E) International Labor Organization

 

53) Which of the following is a principle that governs the world trade organization’s work?

  1. A) giving preference to trading partners who provide maximum business
  2. B) protecting domestic industries by offering financial assistance
  3. C) making trade policies more predictable and less arbitrary
  4. D) establishing dumping procedures to prevent pollution in developed countries
  5. E) implementing protectionist ideologies to establish fair trade between nations

 

54) The ________ was established to foster international financial cooperation and its primary functions include providing short-term loans to countries that are unable to meet their financial obligations and working to alleviate poverty in developing economies.

  1. A) World Trade Organization
  2. B) World Commerce Center
  3. C) European Union
  4. D) North American Free Treaty
  5. E) International Monetary Fund

 

 

55) The World Bank was founded to ________.

  1. A) help countries form their economic policies
  2. B) investigate financial allegations
  3. C) regulate exchange rates
  4. D) provide short-term loans to firms
  5. E) finance reconstruction after World War II

 

56) Trading blocs are ________.

  1. A) international organizations that provide funds to advanced countries
  2. B) regional organizations that promote protectionist principles
  3. C) financial intermediaries that facilitate international transactions
  4. D) regional organizations that promote trade among member nations
  5. E) international organizations that provide funds to developing nations

 

 

57) The North American Free Trade Agreement (NAFTA) was formed by the United States, Canada, and ________.

  1. A) Costa Rica
  2. B) Jamaica
  3. C) Cuba
  4. D) Mexico
  5. E) Honduras

 

58) Which of the following is an example of a trading bloc?

  1. A) International Monetary Fund
  2. B) United Nations
  3. C) European Union
  4. D) World Bank
  5. E) World Trade Organization

 

59) Which of the following statements is true of the European Union (EU)?

  1. A) The EU has imposed hundreds of local regulations and variations in product standards for its member nations.
  2. B) The European Union’s membership now encompasses more than 150 countries.
  3. C) Viewed as a whole, the EU now constitutes the world’s largest economy.
  4. D) The EU adopts protectionist measures to regulate trade among member countries.
  5. E) The EU was formed primarily to monitor global financial developments and to alleviate poverty in developing economies.

 

60) The Asia Pacific Economic Cooperation Council’s long term goal is ________.

  1. A) imposing tariffs and quotas on imports to the land areas that surround the Pacific Ocean
  2. B) protecting the pacific rim from the perils of international trade
  3. C) liberalizing and simplifying trade and investment among member countries
  4. D) preventing the trade of destructive goods such as arms and ammunition
  5. E) preventing terror attacks and other organized crime in the land areas that surround the Pacific Ocean

 

61) ________ refers to assigning a wide range of generalized (and often superficial or even false) attributes to an individual on the basis of membership in a particular culture or social group.

  1. A) Ethnocentrism
  2. B) Stereotyping
  3. C) Protectionism
  4. D) Discerning
  5. E) Culture shock

 

62) ________ is the tendency to judge all other groups according to one’s own group’s standards, behaviors, and customs.

  1. A) Stereotyping
  2. B) Protectionism
  3. C) Discerning
  4. D) Culture shock
  5. E) Ethnocentrism

 

 

63) Legal systems in Great Britain and the U.S. are based on ________ law.

  1. A) bijuridical
  2. B) theocratic
  3. C) common
  4. D) civil
  5. E) civilian

 

64) France and Germany rely on a legal system known as ________, in which legal parameters are specified in detailed legal codes.

  1. A) theocratic law
  2. B) case law
  3. C) common law
  4. D) precedent law
  5. E) civil law

 

 

65) Theocratic law is found in Iran and Pakistan and is based on ________.

  1. A) traditions and customs
  2. B) religious principles
  3. C) detailed legal codes
  4. D) legal parameters
  5. E) judicial interpretations

 

66) Transparency International is a(n) ________.

  1. A) accounting agency that promotes the use of unified accounting systems across the world
  2. B) watchdog group that works to reduce business-government corruption around the world
  3. C) agency that works toward implementing protectionist regimes across the globe
  4. D) agency of the United Nations that is formed to mediate international negotiations
  5. E) agency of the United Nations that is formed to investigate transparency issues in international trade

 

67) Which of the following acts outlaws payments with the intent of getting government officials to break the laws of their own countries?

  1. A) Mustering-out Payment Act
  2. B) Export-Import Bank Act
  3. C) Foreign Corrupt Practices Act
  4. D) Special Payment Act
  5. E) Federal Corrupt Practices Act

 

68) John, a jewelry maker in Montana, receives international orders through his website. He ships the products from the production plant at Montana after receiving confirmed orders. This scenario is an example of ________.

  1. A) importing
  2. B) exporting
  3. C) licensing
  4. D) FDI
  5. E) franchising

 

69) A firm wants to enter foreign markets to expand its business. However, it does not want to make significant investments before assessing foreign conditions. Which of the following strategies is best suited to enter a foreign market slowly and then design the firm’s product offerings?

  1. A) foreign direct investment
  2. B) exporting
  3. C) business merger
  4. D) joint venture
  5. E) franchising

 

70) ________ refers to buying goods or services from a supplier in another country.

  1. A) Franchising
  2. B) Importing
  3. C) Licensing
  4. D) Partnering
  5. E) Intermediating

 

71) ________ agreements entitle one company to use some or all of another firm’s intellectual property in exchange for a royalty payment.

  1. A) Joint venture
  2. B) Exporting
  3. C) Franchising
  4. D) Licensing
  5. E) Strategic alliance

 

72) Quiznos has sold individual owners the rights to use its trademark and business system. Quiznos has opened restaurants in 21 foreign countries in this fashion. This is an example of ________.

  1. A) a strategic alliance
  2. B) export licensing
  3. C) franchising
  4. D) joint venturing
  5. E) a foreign direct investment

 

73) ________ are long-term partnerships between two or more companies to jointly develop, produce, or sell products.

  1. A) Strategic alliances
  2. B) Global franchises
  3. C) Joint ventures
  4. D) Strategic mergers
  5. E) Incorporated partnerships

 

74) In a(n)________, two or more firms bond together to create a new business entity that is legally separate and distinct from its parents.

  1. A) operational partnership
  2. B) strategic alliance
  3. C) joint venture
  4. D) operational alliance
  5. E) international franchise

 

75) Electrobox is a firm that manufactures commercial kitchen equipment. The firm decides to enter China and bonds with a Chinese firm to form a new company named Electrokitchen. This is an example of a(n) ________.

  1. A) transactional alliance
  2. B) operational partnership
  3. C) strategic alliance
  4. D) joint venture
  5. E) international franchise

 

76) Almex is a U.S. based transportation company. In order to enter the Brazilian transportation market, the company purchases one of the leading transporters in Brazil. This strategy is known as ________.

  1. A) operational licensing
  2. B) service exporting
  3. C) foreign direct investing
  4. D) brand licensing
  5. E) outstation franchising

 

 

77) Multinational corporations are companies that ________.

  1. A) export to multiple countries from a central location
  2. B) have formed strategic alliances with companies across the world
  3. C) have formed operational alliances with companies across the world
  4. D) procure supplies from multiple countries to improve their production
  5. E) establish a physical presence in multiple countries through FDI

 

78) Foreign direct investment (FDI) ________.

  1. A) usually does not receive support from domestic governments
  2. B) carries much lesser political risk
  3. C) typically gives companies greater control
  4. D) carries much lesser economic risk
  5. E) is less complex than any other form of global entry

 

 

79) In the ________ strategy, a company creates highly independent operating units in each new country and gives local managers a great deal of freedom to run their operations almost as though they are independent companies.

  1. A) integrated marketing
  2. B) transnational
  3. C) global
  4. D) franchising
  5. E) multidomestic

 

80) Drobex Technologies is a manufacturer of electronic home appliances. The company has operations in 17 countries. The company operates as an independent unit in each of these countries and the head of operations in each unit makes decisions themselves. Drobex is following a(n) ________ strategy.

  1. A) transnational
  2. B) global
  3. C) multidomestic
  4. D) franchising
  5. E) integrated marketing

 

 

81) In a(n)________ strategy, managerial control is highly centralized and major decisions for the company’s international operations are made at the company’s headquarters in the home country.

  1. A) multidomestic
  2. B) franchising
  3. C) global
  4. D) distributed
  5. E) transnational

 

82) Abarma Chemicals produces various types of drugs. The company has a centralized production facility in China. It manufactures standardized products and ships them to various countries from China. The company’s procurement, operations, and customer service are controlled centrally from China. Abarma Chemicals is using a ________ strategy.

  1. A) franchising
  2. B) global
  3. C) distributed
  4. D) transnational
  5. E) multidomestic

 

 

83) In the ________ strategy, a company uses a hybrid approach as it attempts to reap the benefits of international scale while being responsive to local market dynamics.

  1. A) integrated marketing
  2. B) transnational
  3. C) global
  4. D) franchising
  5. E) multidomestic

 

84) DB Computers manufactures and markets personal computers. The company sells its products in more than thirty countries. The company has centralized the production of its CPUs. The CPUs are shipped from the central location to assembly units in various countries and personalized products are made at these units by procuring materials locally. With this strategy the company produces customized products for local markets at a low cost. This is an example of a(n) ________ strategy.

  1. A) integrated marketing
  2. B) transnational
  3. C) global
  4. D) franchising
  5. E) multidomestic

 

85) Which of the following is a major disadvantage of customizing products to suit local markets?

  1. A) Customization is likely to increase the costs and operational complexity.
  2. B) Customized products attract more taxes and duties.
  3. C) It reduces the diversity of a company’s offerings.
  4. D) Customization prevents companies from obtaining subsidies.
  5. E) Customers’ preferences will likely be ignored when using customization.

 

86) Construct a trade plan that identifies the goods that the United States should produce and import based on the classic theory of comparative advantage.

 

87) Coca Foods markets packaged foods in the United States. The company recently decided to expand globally and produce in large quantities from a central location. How will this decision impact the company’s unit cost of production?

 

88) Conduct a secondary research and estimate the balance of trade and balance of payment for the United States.

 

89) Explain how a floating exchange rate system operates.

 

90) Choose a country that follows strong protectionist policies. Construct a document, to be presented in an international conference, that supports the country’s stand in foreign trade.

 

91) Do you think protectionism is totally unwarranted? Explain your answer.

 

92) What type of governmental intervention, according to you, is the most severe? Categorize different types of governmental inventions based on their rigorousness.

 

93) You are the strategist of a firm that manufactures premium cars. The company is planning to enter China as part of its expansion strategy. Conduct a secondary study to identify the various trade barriers that the company will face in China.

 

94) Describe the importance of the World Trade Organization.

 

95) What is a trading bloc? Explain the working of any one trading bloc.

 

96) Compare and contrast the legal systems that exist in different parts of the world.

 

97) In some countries, payoffs to government officials are so common that they are considered by business people as a standard operating practice. However, this practice is illegal in the U.S. under the Federal Corrupt Practices Act (FCPA). Do you feel that the FCPA tries to impose U.S. values on other cultures? Why or why not?

 

98) Compare and contrast strategic alliances with joint ventures.

 

99) Compare and contrast a multidomestic strategy with a global strategy.

 

100) Explain how companies using a transnational strategy manage their business.

 

 

Chapter 4   Business Ethics and Corporate Social Responsibility

 

Business in Action, 6e (Bovee/Thill)

Chapter 4   Business Ethics and Corporate Social Responsibility

 

1) Ethics are principles and standards of moral behavior that are accepted by society as “right” or “wrong.”

 

 

2) All businesses have the capacity to cause harm to employees, customers, other companies, their communities, and investors.

 

 

3) The degree to which information flows freely within an organization is termed as insider trading.

 

4) Culture is not a determinant of ethical behavior.

 

5) Whistle-blowing is illegal.

 

 

6) Making a morally wrong decision is not the same thing as an ethical lapse.

 

 

7) A situation in which an individual makes a decision that is morally wrong or illegal is an ethical dilemma.

 

8) Conflicts of interest involve business decisions that might be influenced by the potential for personal gain.

 

9) Seeking the greatest good for the most people is utilitarianism.

 

 

10) The concept that a business has obligations to society beyond the pursuit of profit is called corporate social responsibility (CSR).

 

 

11) Philanthropy involves social contributions that are directly aligned with a company’s business strategy.

 

 

12) Business and society are mutually dependent, therefore choices that weaken one or the other will ultimately weaken both.

 

13) According to what might be termed the minimalist view, businesses should be involved in making social policy and spending the public’s money.

 

 

14) NGOs are nonprofit groups that provide charitable services or promote causes such as workers’ rights and environmental protection.

 

15) Companies that engage in cynical CSR believe that the only social responsibility of business is to pay taxes and obey the law.

 

 

16) A company accused of irresponsible behavior that promotes itself as being socially responsible without improving its business practices is said to have a cynical CSR.

 

17) In proactive CSR, company leaders believe they have responsibilities beyond making a profit, and they back up their beliefs and proclamations with actions taken on their own initiative.

 

18) “Environmental” causes are often as much about human health and safety as they are about forests, rivers, and wildlife.

 

 

19) Widespread concern for the environment dates to the 1960s when ecology entered mainstream discussion.

 

 

20) Cap and trade programs try to balance free-market economics with government intervention.

 

21) President John F. Kennedy announced a “bill of rights” for consumers, laying the foundation for a wave of consumer-oriented legislation.

 

 

22) One of the fundamental consumer rights that form the basis of much of the consumer-related legislation in the United States is the right to know the lowest available price of a good in the local market.

 

 

23) In 1965, the Federal Cigarette Labeling and Advertising Act was passed, requiring all cigarette packs to carry the Surgeon General’s warnings.

 

 

24) The term “disability,” as used in the federal Americans with Disabilities Act, means only those people with physical handicaps, such as hearing or vision loss or loss of mobility.

 

25) The Occupational Safety and Health Act of 1970 set mandatory standards for safety and health and established the Occupational Safety and Health Administration (OSHA) to enforce them.

 

 

26) ________ are the principles and standards of moral behavior that are accepted by society as right versus wrong.

  1. A) Mandates
  2. B) Ethics
  3. C) Business mindset
  4. D) Etiquette
  5. E) Philanthropy

 

 

27) ________ refers to the degree to which information flows freely within an organization, among managers and employees, and outward to stakeholders.

  1. A) Philanthropy
  2. B) Materialism
  3. C) Whistle-blowing
  4. D) Transparency
  5. E) Utilitarianism

 

28) A leading pharmaceutical company found that a newly launched, over-the-counter drug might have certain negative side effects such as mood changes, that were not identified during the clinical trials. To avoid unnecessary losses, the company does not inform public about the probable side effects. In this example, the company ________.

  1. A) was involved in insider trading
  2. B) lacked transparency
  3. C) had a consumerist approach
  4. D) had a utilitarian approach
  5. E) failed to take affirmative action

 

 

29) Facebook was criticized for a behind-the-scenes attempt to generate public outrage regarding alleged privacy violations by Google. The company used a public relations agency to encourage bloggers and the news media to write critical stories about Google. In this example, Facebook was criticized because ________.

  1. A) it was involved in insider trading
  2. B) it lacked transparency
  3. C) of its consumerist approach
  4. D) of its utilitarian approach
  5. E) it failed to take affirmative action

 

30) The use of unpublicized information that an individual gains from the course of his or her job to benefit from fluctuations in the stock market is called ________.

  1. A) a code of ethics
  2. B) whistle-blowing
  3. C) insider trading
  4. D) utilitarianism
  5. E) strategic CSR

 

 

31) The CEO of a pharmaceutical firm learns that the FDA is going to deny approval for one of the company’s drugs. He knows this will have a negative effect on the company’s stock, so he quickly tells his broker to sell all of his shares of stock in the company before the news is announced. This is an example of ________.

  1. A) strategic CSR
  2. B) whistle-blowing
  3. C) utilitarianism
  4. D) a code of ethics
  5. E) insider trading

 

32) Which of the following is an example of insider trading?

  1. A) The marketing manager of a company is accused of using company resources for personal use.
  2. B) An executive receives a compensation comprising of cash, paid expenses, and shares of the company.
  3. C) An employee hacks the firm’s computer networks, systems, and databases to obtain customer records so that he can sell the information to rival firms.
  4. D) The chief executive officer of an IT company purchases shares in the company as he learns that the company is being taken over by a leading, global IT firm.
  5. E) A firm disseminates fraudulent information in chat rooms, forums, Internet boards, and via email, with the purpose of causing a dramatic price increase in thinly traded stocks of the company.

 

 

33) ________ refers to a written statement setting forth the principles that guide an organization’s decisions.

  1. A) Code of ethics
  2. B) Limited liability agreement
  3. C) Employee procedure policy
  4. D) Statement of sustainable development
  5. E) Statement of corporate opportunity

 

34) A company insider’s disclosure that exposes illegal or unethical behavior by others within the organization is ________.

  1. A) illegal
  2. B) insider trading
  3. C) unethical
  4. D) philanthropic
  5. E) whistle-blowing

 

 

35) Which of the following statements is true regarding whistle-blowing?

  1. A) Whistle-blowing is the normal channel through which employees can address issues involving unethical or illegal behavior within their companies.
  2. B) Whistle-blowing refers to the use of unpublicized information that an individual gains from the course of his or her job to benefit from fluctuations in the stock market.
  3. C) Whistle-blowing occurs when employees share confidential company information with external agents for personal gain.
  4. D) The federal and state laws governing whistle-blowing are simple and clear, so that they can be easily used by employees and employers to navigate through.
  5. E) Although whistle-blowing is sometimes characterized as “ratting on” colleagues or managers, it has an essential function.

 

36) An employee at Cleveland Medical Center informs the media of certain health law violations and negligence that lead to documented illness and even death in certain cases. This is an example of ________.

  1. A) insider trading
  2. B) whistle-blowing
  3. C) affirmative action
  4. D) consumerism
  5. E) strategic CSR

 

 

37) Which of the following is an example of whistle-blowing?

  1. A) An employee discloses confidential information about the company to a rival firm for personal gain.
  2. B) An employee suggests some process changes to his manager, that he claims will increase the productivity of the team.
  3. C) An employee avoids taking ownership of his mistakes by blaming it on his co-workers.
  4. D) An employee informs the manager that some of his team members are misusing confidential customer details from the company database.
  5. E) An employee who is unsatisfied with his performance appraisal requests his manager for a re-evaluation of his performance.

 

38) Which of the following statements is true regarding ethical decision making?

  1. A) When an employee is unable to make a decision because more than one side of an issue can be supported with valid arguments, it is called an ethical lapse.
  2. B) The disclosure of information by a company insider that exposes unethical behavior by others within the organization is called an ethical lapse.
  3. C) Stakeholders’ needs often conflict, requiring managers to make tough decisions about resource allocation.
  4. D) Making objective decisions will lead to ethical lapses.
  5. E) When the question of what is right and what is wrong is clear, ethical decisions are easy to implement.

 

 

39) A situation in which you must choose between two conflicting but arguably valid alternatives would be known as a(n) ________.

  1. A) insider trading
  2. B) ethical lapse
  3. C) corporate opportunity
  4. D) ethical dilemma
  5. E) conflict of interest

 

40) The CEO of a company considers offshoring some of its production to another country with lower labor costs. This decision would favor the company’s customers who will benefit from lower prices. The shareholders also stand to benefit from lower production costs, which could increase sales, profits, or both, probably leading to increases in share prices. However, some employees will lose their jobs, and morale is likely to suffer among those employees who keep theirs. In this situation, the CEO faces a(n) ________.

  1. A) ethical dilemma
  2. B) ethical lapse
  3. C) strategic CSR
  4. D) defensive CSR
  5. E) cognitive dissonance

 

 

41) The manager of a golf course awards a landscaping contract to his brother-in-law’s company, even though another company was willing to do the same work for less money. This is an example of ________.

  1. A) defensive CSR
  2. B) code of ethics
  3. C) conflict of interest
  4. D) strategic CSR
  5. E) ethical dilemma

 

42) Which of the following approaches to resolving ethical dilemmas advocates choosing the option that delivers the most good for the most people?

  1. A) individual rights
  2. B) utilitarianism
  3. C) strategic CSR
  4. D) sustainable development
  5. E) Kantian ethics

 

43) The products of Sports Center, an international sports footwear and apparel chain, are manufactured in sweat factories in China. According to the company president, using sweatshop labor is justified because it delivers the most good for the most people. He mentions that it offers a means of livelihood to children and young adults, as well as supplies good quality apparel to customers at a lower cost. In this example, the president of Sports Center uses which of the following ethical approaches to decision making?

  1. A) affirmative action
  2. B) Kantian ethics
  3. C) individual rights
  4. D) utilitarianism
  5. E) deontological ethics

 

44) Which of the following ethical approaches emphasizes desirable character traits such as integrity and compassion?

  1. A) utilitarianism
  2. B) Kantian ethics
  3. C) deontological ethics
  4. D) affirmative action
  5. E) virtue

 

45) Which of the following is true regarding the justice approach to ethics?

  1. A) It refers to treating people equally, or at least fairly, in a way that makes rational and moral sense.
  2. B) It refers to choosing the option that delivers the most good for the most people.
  3. C) It involves making social contributions that are directly aligned with a company’s overall business strategy.
  4. D) It emphasizes qualities and conditions that benefit the community as a whole, such as peace and public safety.
  5. E) It refers to the movement that pressures businesses to consider consumer needs and interests.

 

46) Corporate social responsibility refers to ________.

  1. A) the rules or standards governing the conduct of a person or group
  2. B) a written statement setting forth the principles that guide an organization’s decisions
  3. C) the notion that business has obligations to society beyond the pursuit of profits
  4. D) business that operates in a manner that minimizes pollution and resource depletion, ensuring that future generations will have vital resources
  5. E) the movement that pressures businesses to consider consumer needs and interests

 

 

47) The idea that a business has obligations to society beyond the pursuit of profits is ________.

  1. A) corporate social responsibility
  2. B) utilitarianism
  3. C) philanthropic sustainability
  4. D) ethical minimization
  5. E) opportunistic responsibility

 

48) ________ involves donating money, employee time, or other resources to various causes without regard for any direct business benefits for the company.

  1. A) Philanthropy
  2. B) Strategic CSR
  3. C) Cap and trade
  4. D) Sustainable development
  5. E) Affirmative action

 

 

49) LK Manufacturing Group, a company that manufactures home appliances, supports a community sports center to nurture the city’s athletic talent as well as promote fitness activities, without regard for any direct business benefits. This exemplifies ________.

  1. A) strategic CSR
  2. B) cap and trade
  3. C) sustainable development
  4. D) philanthropy
  5. E) affirmative action

 

50) Which of the following is an example of philanthropy?

  1. A) An IT company donates money to an orphanage without expecting any business benefits.
  2. B) A niche gourmet retail store holds free-for-all bakery classes by celebrity chefs in its store.
  3. C) A bookstore arranges free-for-all book reading and autograph session with authors of newly published books in stores.
  4. D) A sporting goods retail store holds a sports competition in the neighborhood community center to generate interest in athletics.
  5. E) A pharmaceutical company sponsors a blood donation camp, where it also advertises some of its products.

 

 

51) A company helps develop the workforce by supporting job training efforts. This is an example of ________.

  1. A) strategic CSR
  2. B) cap and trade
  3. C) sustainable development
  4. D) philanthropy
  5. E) affirmative action

 

52) Which of the following is true about strategic CSR?

  1. A) It involves donating money, employee time, or other resources to various causes without regard for any direct business benefits for the company.
  2. B) It is an attempt to balance free-market economics with government intervention.
  3. C) It refers to organizational growth that meets the needs of the present without compromising the ability of future generations to meet their own needs.
  4. D) It involves social contributions that are directly aligned with a company’s overall business plans.
  5. E) It refers to the argument that firms should indulge in philanthropy only when there is no conflicts of interest with the profitability of the firm.

 

 

53) Unlike general philanthropy, strategic CSR ________.

  1. A) promotes an antagonistic business-versus-society mindset
  2. B) leads to weakening of both the business and the society
  3. C) refers to CSR activities that are mandatory according to law
  4. D) is aimed at specific sections of the society that have been historically discriminated against
  5. E) is more likely to be sustained over time

 

54) The British firm Thames Water helped develop markets for its goods and services by assisting groups trying to improve water supplies in Africa. This is an example of ________.

  1. A) cap and trade
  2. B) the minimalistic view
  3. C) strategic CSR
  4. D) philanthropy
  5. E) affirmative action

 

 

55) Aston Products Inc., a cosmetic research, development, and manufacturing firm, conducts a cost-benefit analysis that identifies an underdeveloped area which has cheap labor and low land costs. The firm decides to set up a factory in that area to take advantage of the lower land and labor costs. While setting up the factory, the company also develops infrastructure such as building roads, hospitals, and primary schools. This is an example of ________.

  1. A) philanthropy
  2. B) the minimalistic view
  3. C) affirmative action
  4. D) strategic CSR
  5. E) cap and trade

 

56) According to the ________ view, the only social responsibility of business is to pay taxes and obey the law.

  1. A) defensive
  2. B) minimalist
  3. C) cynical
  4. D) proactive
  5. E) strategic

 

57) John, a business owner, refuses to contribute to social causes. He argues that he is an honest, law abiding businessman who never evades his taxes. He states that by providing good quality products at a fair price, he has fulfilled his company’s obligation to society. John would be said to have a ________ approach to CSR.

  1. A) defensive
  2. B) minimalist
  3. C) cynical
  4. D) proactive
  5. E) strategic

 

58) Nongovernmental organizations are ________.

  1. A) publicly traded and owned entities
  2. B) firms that apply sustainable business strategies to achieve their business goals
  3. C) nonprofit groups that provide charitable services or promote causes
  4. D) firms that derive a substantial portion of their income from trade
  5. E) composed primarily of sovereign states (referred to as member states), or of other intergovernmental organizations

 

59) A ________ CSR is one in which a company accused of irresponsible behavior promotes itself as being socially responsible without making significant improvements in its business practices.

  1. A) minimalist
  2. B) philanthropic
  3. C) strategic
  4. D) proactive
  5. E) cynical

 

60) A company that takes positive steps to address a particular issue, but only because it has been embarrassed into action by negative publicity, has a ________ CSR.

  1. A) minimalist
  2. B) defensive
  3. C) strategic
  4. D) proactive
  5. E) cynical

 

61) Shopper’s Paradise, a department store chain, was accused of working with contractors who use sweatshop labor in their manufacturing units. The company was labeled as promoting unethical business policies. To deal with these criticisms, the company decides to make a large donation to a cancer research foundation, as well as sponsor a health awareness program in the community. Shopper’s Paradise would be said to have a ________ approach to CSR.

  1. A) minimalist
  2. B) strategic
  3. C) proactive
  4. D) defensive
  5. E) philanthropic

 

62) Publicity efforts that portray a company as being environmentally friendly when its actions speak otherwise are called ________.

  1. A) environmental minimalism
  2. B) quasi-environmentalism
  3. C) greenwashing
  4. D) collectivism
  5. E) proactivism

 

 

63) Toy Land Inc. was criticized for selling toys that had lead paint and were proven to be harmful for children. The company recalled several batches of toys. It responded to these accusations by changing its logo to include a recycle theme, using advertisements that promoted waste management and recycling, and providing Toy Land Inc. branded reusable shopping bags at their store. However, the firm did not undertake any specific measures to avoid using toxic materials in its products. This is an example of ________.

  1. A) proactive CSR
  2. B) cynical CSR
  3. C) minimalistic CSR
  4. D) primary CSR
  5. E) philanthropic CSR

 

64) An eco-friendly health resort claims to be environment friendly, and markets itself as an eco-resort. However, it engages in irresponsible activities such as wastage of water, disposal of plastic and other untreated wastes into the water bodies, and cutting trees in protected areas to expand its facilities. This is an example of ________.

  1. A) environmental minimalism
  2. B) quasi-environmentalism
  3. C) greenwashing
  4. D) collectivism
  5. E) proactivism

 

65) In ________ CSR, company leaders believe they have responsibilities beyond making a profit, and they back up their beliefs and proclamations with actions taken on their own initiative.

  1. A) proactive
  2. B) cynical
  3. C) minimalistic
  4. D) primary
  5. E) philanthropic

 

66) Since its inception, Whole Foods Market has contributed 5% of its profits to charitable endeavors. At Whole Foods Market, company leaders believe they have responsibilities beyond making a profit. The firm has a ________ approach to CSR.

  1. A) cynical
  2. B) minimalistic
  3. C) primary
  4. D) philanthropic
  5. E) proactive

 

 

67) Most of the electricity generated in the United States is produced by ________.

  1. A) burning fossil fuels
  2. B) from nuclear power
  3. C) from hydroelectric power
  4. D) from solar power
  5. E) harnessing wind power

 

68) Which of the following statements is true?

  1. A) The creation, delivery, use, and disposal of products that society values can be carried out without generating any pollution and consuming any natural resources.
  2. B) Web-based businesses are “clean” because there is no pollution associated with them.
  3. C) Environmental issues are easy and simple, and companies can easily make decisions when faced with such issues.
  4. D) Environmental issues faced by businesses are about forests, rivers, and wildlife; and not about human health and safety.
  5. E) Dealing with environmental issues often requires tough trade-offs, occasional sacrifice, and disruptive change.

 

 

69) ________ is the study of the relationship between organisms and the natural environment.

  1. A) Environmentalism
  2. B) Ecology
  3. C) Energy conservation
  4. D) Ergonomics
  5. E) Sustainability

 

70) The ________ establishes procedures for creating geologic repositories of radioactive waste.

  1. A) Clean Air Act
  2. B) Solid Waste Disposal Act
  3. C) Toxic Substances Control Act
  4. D) Nuclear Waste Policy Act
  5. E) Resource Recovery Act

 

71) The Resource Recovery Act (1970) ________.

  1. A) subsidizes pilot recycling plants
  2. B) regulates treatment, storage, transportation, and disposal of hazardous waste
  3. C) establishes a structure for coordinating all federal environmental programs
  4. D) authorizes grants to states for water-pollution control
  5. E) prohibits ocean dumping that could threaten human health or the marine environment

 

 

72) Under ________, lawmakers establish maximum allowable amounts of a pollutant that an industry is allowed to emit and distribute individual allowances to all companies in that industry.

  1. A) sustainable development
  2. B) cap and trade
  3. C) ecological barter
  4. D) environmental control
  5. E) carbon offset projects

 

73) Which of the following statements is true about cap and trade programs?

  1. A) They promote an anti-business perspective.
  2. B) They provide technological solutions to reduce pollution and resource consumption.
  3. C) They force companies to choose the highest-cost means of taking responsibility for their emissions.
  4. D) They try to balance free-market economics with government intervention.
  5. E) They put pressure on businesses to consider consumer needs and interests.

 

 

74) ________ is defined as meeting the needs of the present without compromising the ability of future generations to meet their own needs.

  1. A) Greenwashing
  2. B) Consumerism
  3. C) Materialism
  4. D) Sustainable development
  5. E) Cap and trade

 

75) American Housing Inc., a construction firm, uses innovative home designs that use insulating building materials aimed at reducing the energy consumption of the apartments and homes it builds. This gives it an edge over other businesses, and is environment friendly as well. This is an example of ________.

  1. A) cap and trade
  2. B) greenwashing
  3. C) consumerism
  4. D) affirmative action
  5. E) sustainable development

 

 

76) What is the meaning of the term “consumerism”?

  1. A) overspending by customers
  2. B) overspending by corporations
  3. C) pressuring businesses to consider consumer needs
  4. D) pressuring consumers to consider business needs
  5. E) unexpected demand by buyers

 

77) Which of the following federal legislations limits cardholder liability for unauthorized use?

  1. A) Magnuson-Moss Warranty Act (1975)
  2. B) Fair Credit Reporting Act (1970)
  3. C) Truth in Lending Act (Consumer Protection Credit Act) (1968)
  4. D) Deceptive Mail Prevention and Enforcement Act (1999)
  5. E) Fair Packaging and Labeling Act (1966, 1972)

 

 

78) The Magnuson-Moss Warranty Act (1975) requires complete written warranties in ordinary language and requires warranties to be ________.

  1. A) applicable for minimum one year
  2. B) supported by the manufacturer
  3. C) supported by the retailer
  4. D) available before purchase
  5. E) contained on package labeling

 

79) Mark hacks into the database of an e-commerce firm and steals the social security numbers of many of its customers. He then uses these numbers to take loans. This is an example of ________.

  1. A) phishing
  2. B) identity theft
  3. C) spamming
  4. D) brandjacking
  5. E) cybersquatting

 

80) Which of the following regulatory agencies is responsible for monitoring the hiring practices of companies and can require them to compensate individuals who have been victimized by unfair hiring practices.

  1. A) Federal Employment Commission (FEC)
  2. B) Civil Rights Commission (CRC)
  3. C) Employee Protection Commission (EPC)
  4. D) Employment Regulatory Commission (ERC)
  5. E) Equal Employment Opportunity Commission (EEOC)

 

81) Activities undertaken by businesses to recruit and promote members of groups whose economic progress had been hindered through either legal barriers or established practices are known as ________.

  1. A) greenwashing
  2. B) sustainable development
  3. C) multiculturism
  4. D) affirmative action
  5. E) selective recruiting

 

82) The Civil Rights Act of 1991 amended the original act, and ________.

  1. A) provided for unlimited amount of damage awards
  2. B) made it mandatory for private firms to employ persons from minority groups
  3. C) made it tougher to sue for discrimination
  4. D) gave employees the right to have a trial by jury in discrimination cases
  5. E) made it mandatory for the government to subsidize programs based on race

 

83) Which of the following is true about the Americans with Disabilities Act (ADA)?

  1. A) It allows employers to ask job applicants to pass a physical examination as a condition of employment.
  2. B) It protects only those individuals who have physical handicaps.
  3. C) It guarantees equal opportunities in housing, transportation, education, employment, and other areas for people with disabilities.
  4. D) It excludes people with drug addiction, alcoholism, emotional illness, and other conditions.
  5. E) It subsidizes modifications to work stations or schedules undertaken by firms to make the workplace more accessible to people with disabilities.

 

 

84) ________ is the study of how people interact with computers and other machines.

  1. A) Consumerism
  2. B) Ergonomics
  3. C) Systems psychology
  4. D) Environmental design
  5. E) Anthropometry

 

85) Production facilities that treat workers poorly are referred to as ________.

  1. A) ergonomic units
  2. B) maquiladora
  3. C) contingent work
  4. D) warehouses
  5. E) sweatshops

 

 

86) What is ethics? List the components of good business ethics?

 

 

87) Compare and contrast insider trading and whistle-blowing.

 

88) Compare and contrast ethical lapse and ethical dilemma?

 

89) What is a conflict of interest? How is it related to ethical decision making?

 

90) Compare and contrast the various approaches used to resolve ethical dilemmas.

 

91) Compare and contrast philanthropy and strategic CSR.

 

92) Compare and contrast the minimalist and the purely cynical perspective on corporate social responsibility.

 

 

93) What is defensive CSR? How is it different from proactive CSR?

 

94) Discuss the two-tiered approach to CSR.

 

95) What are cap and trade programs?

 

 

96) Compare and contrast cap and trade programs and sustainable development.

 

97) What is consumerism? List the fundamental consumer rights.

 

98) Compare and contrast discrimination and affirmative action.

 

 

99) Discuss some of the key responsibilities that employers have regarding employees. Compare them with the responsibility they have toward consumers.

 

100) Discuss the functions of the Equal Employment Opportunity Commission (EEOC).

 

Chapter 5   Forms of Ownership

 

Business in Action, 6e (Bovee/Thill)

Chapter 5   Forms of Ownership

 

1) Owner has limited personal liability for the business’s financial obligations in sole proprietorships.

 

 

2) Establishing a corporation is more complicated and expensive compared to establishing a sole proprietorship.

 

 

3) The federal government recognizes a sole proprietorship as an independent taxable entity.

 

 

4) Unlimited liability is a legal condition under which any damages or debts incurred by a business are the owner’s personal responsibility.

 

5) A partnership is a company that is owned by two or more people but is not a corporation.

 

 

6) All partners have joint authority to make decisions for the firm in a general partnership.

 

 

7) A master limited partnership is not allowed to raise money by selling units of ownership to the general public.

 

 

8) Partners are responsible for each other’s action in a limited liability partnership.

 

9) Partnerships are subject to double taxation of income.

 

10) All owners in a general partnership and the general partners in a limited partnership face the same unlimited liability as sole proprietors.

 

 

11) A corporation is a legal entity distinct from the persons running the corporation.

 

 

12) The stock of a private corporation is made available for purchase by the public.

 

 

13) Liquidity is a measure of how easily and quickly an asset can be converted into cash.

 

 

14) A corporation itself has limited liability on its transactions.

 

15) Government agencies require publicly traded companies to publish extensive and detailed financial reports.

 

 

16) An S corporation has the federal taxation advantages of a partnership.

 

17) The number of shareholders is limited to fifty in a limited liability company.

 

 

18) A benefit corporation must pursue a stated non-financial goal.

 

19) Board of directors has the responsibility for the overall direction of the company and the selection of top executives.

 

 

20) Corporate officers of an organization are elected directly by the shareholders of a corporation.

 

21) Proxy is a document that authorizes another person to vote on behalf of a shareholder in a corporation.

 

 

22) The chief operating officer is the highest-ranking officer of a corporation.

 

 

23) One company buys a controlling interest in the voting stock of another company in a merger.

 

24) A horizontal merger occurs when different companies at the same stage or level merge.

 

25) A joint venture does not result in a separate legal entity.

 

 

26) A sole proprietorship ________.

  1. A) is taxed as a separate corporation
  2. B) requires immense paperwork
  3. C) does not have a legal status
  4. D) is owned by only one person
  5. E) gives reduced control to the owner

 

 

27) Robert owns three restaurants in Atlanta. He pays taxes for the income from the restaurants as his personal income. Robert’s business is an example of a ________.

  1. A) personal partnership
  2. B) sole proprietorship
  3. C) joint venture
  4. D) small corporation
  5. E) limited liability firm

 

28) Profits of sole proprietorships ________.

  1. A) reach shareholders through intermediaries
  2. B) flow directly to the owners
  3. C) are considered fixed assets
  4. D) are taxed at corporate rates
  5. E) are subject to double taxation

 

 

29) Which of the following statements is true of the liability of investors in a corporation?

  1. A) Majority investors are personally liable, whereas minority investors are not personally liable.
  2. B) Investors have personal liability for the business transactions in corporations.
  3. C) Investor’s liability is limited to the amount invested in the corporation.
  4. D) Investors are personally liable for transactions, whereas their property is not liable.
  5. E) Investors’ property is liable for the business transactions but investors are not personally liable.

 

 

30) Which of the following business structures is the most complicated and expensive?

  1. A) unlimited partnership
  2. B) corporation
  3. C) general partnership
  4. D) sole proprietorship
  5. E) limited partnership

 

31) Edwin runs an antique retail shop that is registered as a sole proprietorship. The liability exposure of Edwin’s business ________.

  1. A) is limited to the amount he has invested on fixed assets
  2. B) refers to the amount invested on variable assets
  3. C) is more if the size of transactions is limited
  4. D) refers to the total fixed investments made by him
  5. E) is unlimited for the business’s personal obligations

 

32) Which of the following is a key difference between a corporation and a sole proprietorship?

  1. A) Establishing a corporation is easier compared to establishing a proprietorship.
  2. B) Unlike a corporation, a proprietorship is subject to double taxation.
  3. C) Regulatory requirements are less severe for corporations than sole proprietorships.
  4. D) Unlike a sole proprietorship, a corporation is subject to limited liability.
  5. E) Establishing a sole proprietorship has complex legal requirements unlike a corporation.

 

33) Which of the following is a key advantage of incorporating a business as a sole proprietorship?

  1. A) Owners receive tax exemptions when a business is a sole proprietorship.
  2. B) It helps proprietors file taxes separately from their personal income.
  3. C) It is easy to establish and requires less paperwork than other structures.
  4. D) Owner’s risk is limited to the extent he/she has invested in the business.
  5. E) Risk associated with sole proprietorship is less compared to other structures.

 

34) In a sole proprietorship, the owner ________.

  1. A) obtains limited liability protection on the business’s actions
  2. B) is taxed more than once for the income generated
  3. C) and the business are legally inseparable
  4. D) has lesser responsibility compared to other forms
  5. E) does not have personal liability for the transactions of the business

 

35) A ________ is an unincorporated company owned by two or more people.

  1. A) limited company
  2. B) partnership
  3. C) corporation
  4. D) S corporation
  5. E) proprietorship

 

36) In a general partnership, ________.

  1. A) all partners have joint authority to make decisions
  2. B) all partners have limited liability
  3. C) the number of partners is limited to five
  4. D) units of ownership are sold to the general public
  5. E) risk is limited to the amount invested in a partnership

 

37) A ________ is allowed to raise money by selling units of ownership to the general public in the same way corporations sell shares of stock to the public.

  1. A) master limited partnership
  2. B) general partnership
  3. C) sole proprietorship
  4. D) unlimited proprietorship
  5. E) limited liability partnership

 

 

38) A ________ is a partnership in which each partner has unrestricted accountability only for his or her own actions and at least some degree of responsibility for the partnership as a whole.

  1. A) master limited partnership
  2. B) general partnership
  3. C) sole proprietorship
  4. D) combined proprietorship
  5. E) limited liability partnership

 

39) Which of the following is a key difference between a master limited partnership (MLP) and other forms of partnerships?

  1. A) A MLP allows partnerships to sell units of ownership to the general public.
  2. B) Other partnerships should have more members than an MLP.
  3. C) Other partnerships have double-taxation disadvantage unlike an MLP.
  4. D) A MLP allows the partners to have limited liability on their investments.
  5. E) A MLP is characterized by double taxation unlike the other forms of partnerships.

 

40) A major advantage of partnerships is that they ________.

  1. A) do not require owners to take personal responsibility for their actions
  2. B) provide limited liability protection to partners
  3. C) have a straightforward income tax structure
  4. D) are less vulnerable to conflicts between investors
  5. E) allow investors to handle issues such as succession and termination better

 

41) A potentially significant disadvantage of a partnership is that ________.

  1. A) it involves double taxation of the income generated
  2. B) income tax is not straightforward and is complex
  3. C) it has more chances for disagreement and conflict
  4. D) it does not present opportunities to share costs
  5. E) the amount of money generated in a partnership is low

 

 

42) Which of the following is a valid observation of corporations?

  1. A) A corporation cannot own property of its own.
  2. B) All corporations should sell its stock to the public.
  3. C) The owners of a corporation are called directors.
  4. D) A corporation is distinct from the people running it.
  5. E) A corporation must be owned by less than fifty people.

 

43)  Which of the following is a key difference between private corporations and public corporations?

  1. A) Private corporations are legally a group of people, whereas public corporations are distinct from any individual persons.
  2. B) Private corporations cannot own property, whereas public corporations can own property.
  3. C) Public corporations cannot own property, whereas private corporations can own property.
  4. D) Private corporations do not have the power to run business of its own, whereas public corporations can run a business of its own.
  5. E) Private corporations are owned by a few people, whereas public corporations can be owned by anyone who has the means to buy stake.

 

 

44) Which of the following is a key advantage that corporations have over sole proprietorships and partnerships?

  1. A) Management is less likely to lose control of operations in corporations than proprietorships and partnerships.
  2. B) Reporting requirements of corporations are simpler than sole proprietorships and partnerships.
  3. C) Forming corporations involves less cost over sole proprietorships and partnerships.
  4. D) Investments in corporations have more liquidity than partnerships and sole proprietorships.
  5. E) Corporations have a less complex structure compared to sole proprietorships and partnerships.

 

45) A disadvantage of the corporate structure is that it ________.

  1. A) limits the business’s ability to raise capital
  2. B) limits the liquidity that businesses have
  3. C) increases the risk of conducting business
  4. D) involves strict reporting requirements
  5. E) imposes unlimited liability on the owners

 

 

46) S corporation is a type of corporation that ________.

  1. A) combines limited liability of a corporation with the federal taxation advantages of a partnership
  2. B) does not have such advantages as limited liability of investments
  3. C) does not split the ownership into smaller units
  4. D) files income tax returns in a country other than the country of operation
  5. E) combines limited ownership of a proprietorship with the capital-raising options of a corporation

 

47) A group of college graduates starts a business. They want to give their business a structure such that their risk is limited to the amount they have invested in the business. They also want to avoid double taxation of the income that they generate from the business. Which of the following structures is most suitable to satisfy these wants?

  1. A) sole proprietorship
  2. B) corporation
  3. C) direct partnership
  4. D) S corporation
  5. E) general partnership

 

 

48) A(n) ________ has most of the attributes of a regular corporation but adds the legal requirement that the company must also pursue a stated non-financial goal.

  1. A) limited liability corporation
  2. B) general partnership
  3. C) S corporation
  4. D) sole proprietorship
  5. E) benefit corporation

 

49) RSS Bank is registered as a corporation in Maryland. Apart from its financial objectives, the company has also formed a legal requirement to work for the welfare of the elderly citizens in the state. The bank is obligated to work for the cause even if there is a change in ownership. Based on this information, it can be concluded that RSS bank is a(n) ________.

  1. A) public corporation
  2. B) benefit corporation
  3. C) unlimited company
  4. D) S corporation
  5. E) not-for-profit company

 

50) A public corporation refers to a corporation ________.

  1. A) that is allowed to sell stock only to a limited number of investors
  2. B) whose stock is sold to general people
  3. C) that is owned solely by the federal government
  4. D) that is owned solely by state/federal government
  5. E) whose stock is not traded in stock exchanges or other markets

 

51) A corporation primarily or wholly owned by another company is known as a(n) ________.

  1. A) domestic company
  2. B) alien company
  3. C) subsidiary
  4. D) parent company
  5. E) holding company

 

52) Pacific Electronics is a Swiss corporation doing business in the U.S. It was incorporated in Switzerland, in the year 1997. The company sells products such as electronic measuring devices, microprocessors, and microcontrollers. Pacific Electronics is called a(n) ________.

  1. A) alien corporation
  2. B) foreign corporation
  3. C) domestic corporation
  4. D) external company
  5. E) unlimited company

 

53) A company that is incorporated in one state (frequently the state of Delaware, where incorporation laws are more lenient) but that does business in several other states where it is registered is called a(n) ________.

  1. A) foreign corporation
  2. B) domestic corporation
  3. C) global corporation
  4. D) alien corporation
  5. E) international corporation

 

54) RK Associates is a firm incorporated in the state of Delaware. The company has operations in thirteen states. However, the company does not have any facilities in countries other than the United States. RK Associates is a(n) ________.

  1. A) international company
  2. B) local corporation
  3. C) domestic company
  4. D) alien corporation
  5. E) foreign corporation

 

55) In the United States, a corporation is called a domestic corporation if it ________.

  1. A) does business only in the state where it is chartered
  2. B) files income taxes with the U.S. government
  3. C) does business only within the United States
  4. D) has more than 5 subsidiaries in the United States
  5. E) has incorporated its business in any of the U.S. states

 

 

56) The board of directors are ________.

  1. A) the highest-ranked managers of a corporation
  2. B) elected by corporate officers
  3. C) representatives of the shareholders
  4. D) the top executives running a corporation
  5. E) elected by the employees of an organization

 

57) Which of the following is a document that authorizes another person to vote on behalf of a shareholder in a corporation?

  1. A) agency agreement
  2. B) proxy
  3. C) draft
  4. D) affidavit
  5. E) share certificate

 

 

58) Robex Retail is a retail chain that has more than 390 stores in the United States. The directors of the company decide to launch operations in Italy to increase the company’s market reach. Many of the shareholders think that this decision is not appropriate in light of the economic slowdown in Europe. A group of shareholders unite to pressurize the board of directors to change their decision. This is an example of ________.

  1. A) shareholder protection
  2. B) shareholder activism
  3. C) hostile takeover
  4. D) corporate governance
  5. E) shareholder resolution

 

59) Corporate officers are the ________.

  1. A) people who elect directors of a company
  2. B) official representatives of shareholders
  3. C) top executives who run a corporation
  4. D) middle level managers of a corporation
  5. E) lower level employees of an organization

 

60) Who is the highest-ranked officer of a corporation?

  1. A) chief information officer
  2. B) chief financial officer
  3. C) chief operating officer
  4. D) chief executive officer
  5. E) chief technology officer

 

61) Corporate officers of a company ________.

  1. A) are hired by the board of directors of a company
  2. B) have voting rights in directorial meetings
  3. C) are hired by the chief executives of a firm
  4. D) have voting rights on shareholding issues
  5. E) are elected by the shareholders of the company

 

62) In a(n) ________, two companies join to form a single entity either by pooling their resources or by one company purchasing the assets of the other.

  1. A) limited partnership
  2. B) acquisition
  3. C) merger
  4. D) joint venture
  5. E) strategic alliance

 

63) In a(n) ________, two companies create a new, third entity that then purchases the two original companies.

  1. A) limited partnership
  2. B) consolidation
  3. C) acquisition
  4. D) joint venture
  5. E) strategic alliance

 

64) In a(n) ________, one company simply buys a controlling interest in the voting stock of another company.

  1. A) limited partnership
  2. B) consolidation
  3. C) acquisition
  4. D) joint venture
  5. E) strategic alliance

 

65) RDS Bank has been making losses for many years now. The company’s management wants to continue with the same style of operations, whereas many shareholders demand a change in management. A majority of shareholders unite and vote against the management’s wish to sell the company to a larger counterpart subject to pressures from an external buyer. This is an example of a(n) ________.

  1. A) forced joint venture
  2. B) hostile takeover
  3. C) strategic alliance
  4. D) majority merger
  5. E) operational alliance

 

66) A ________ occurs when someone purchases a company’s publicly-traded stock primarily by using borrowed funds, sometimes using the target company’s assets as collateral for these loans.

  1. A) leveraged buyout
  2. B) hostile takeover
  3. C) forced joint venture
  4. D) consolidation
  5. E) strategic alliance

 

67) A vertical merger occurs when ________.

  1. A) a merger expands the geographic range of markets that it can serve
  2. B) different stages or levels of the same industry unite
  3. C) different companies at the same stage or level unite
  4. D) a merger expands the mix of goods and services available for sale
  5. E) two companies from unrelated industries unite to become a single company

 

68) An electronic appliance marketing company merges with one of its suppliers to form a larger company. This is an example of a ________ merger.

  1. A) market-extension
  2. B) product differentiation
  3. C) conglomerate
  4. D) vertical
  5. E) product-extension

 

 

69) A product-extension merger occurs when ________.

  1. A) two companies from unrelated industries unite to become a single company
  2. B) different stages or levels of the same industry unite
  3. C) different companies merge to increase global reach
  4. D) a merger expands the mix of goods and services available for sale
  5. E) a merger expands the geographic range of markets that it can serve

 

70) A ________ merger occurs when different companies at the same stage or level merge.

  1. A) standardized
  2. B) horizontal
  3. C) conglomerate
  4. D) vertical
  5. E) operational

 

 

 

71) Eurotec, a manufacturer of security systems in Italy, merges with a company in China to expand its reach. This is an example of a ________ merger.

  1. A) product-extension
  2. B) vertical
  3. C) conglomerate
  4. D) retail
  5. E) market-extension

 

 

72) A ________ merger occurs when companies in unrelated industries join to form a single entity.

  1. A) product-extension
  2. B) vertical
  3. C) conglomerate
  4. D) retail
  5. E) market-extension

 

73) Froxer Electronics is an electronic appliance manufacturer. The company merges with a food manufacturer to form a larger company. This is an example of a ________ merger.

  1. A) product-extension
  2. B) vertical
  3. C) retail
  4. D) market-extension
  5. E) conglomerate

 

 

74)  Which of the following is a key disadvantage of mergers and acquisitions?

  1. A) They limit the market reach of the companies involved.
  2. B) They reduce the chances of cross-selling products.
  3. C) They reduce the bargaining power of the companies.
  4. D) They might present issues related to cultural harmony.
  5. E) They limit the geographic range of the companies involved.

 

75) In a ________, the raider launches a public relations battle for shareholder votes, hoping to enlist enough votes to oust the board and management.

  1. A) poison pill tactic
  2. B) proxy fight
  3. C) tender offer
  4. D) direct offer
  5. E) white knight tactic

 

76) With a ________, a targeted company invokes some move that makes it less valuable to the potential raider, with the hope of discouraging the takeover.

  1. A) white knight tactic
  2. B) tender offer
  3. C) proxy fight
  4. D) direct offer
  5. E) poison pill defense

 

77) Integral Solutions is a firm that offers open source enterprise software services to small and medium companies. The company had a public issue two years ago and the company has shown significant growth in the current financial year. A major rival is silently amassing the company’s shares to acquire majority stake in the company. In order to prevent this, the company issues shares to current shareholders at prices below the market value. This tactic used by Integral Solutions to prevent a takeover is an example of a ________.

  1. A) poison pill defense
  2. B) proxy fight
  3. C) direct offer
  4. D) tender offer
  5. E) white knight tactic

 

78) With the ________, a third company is invited to acquire a company that is in danger of being swallowed up in a hostile takeover.

  1. A) poison pill defense
  2. B) proxy fight
  3. C) direct offer
  4. D) tender offer
  5. E) white knight tactic

 

79) Albama Associates is a consulting firm owned by a few entrepreneurs. Rogo Consulting, a large consulting firm, tries to buy shares from some of the shareholders of Albama to obtain control of the company without making a formal acquisition proposal with the management. Albama’s management invites a third party to acquire the company to prevent a hostile takeover by Rogo Consulting. This approach used by Albama to prevent hostile takeover is an example of a ________.

  1. A) white knight tactic
  2. B) counteroffer
  3. C) proxy fight
  4. D) direct offer
  5. E) poison pill defense

 

80) Which of the following is an action that allows the companies to collaborate without formally combining?

  1. A) strategic alliance
  2. B) joint venture
  3. C) merger
  4. D) acquisition
  5. E) amalgamation

 

81) Strategic alliances are ________.

  1. A) internal agreements formed between the subsidiaries of a company
  2. B) not helpful when a company has to gain credibility in a new field
  3. C) a means of permanently integrating two companies in a business
  4. D) an alternative to mergers and acquisitions with less risk and work
  5. E) not helpful when a company’s aim is expanding its market presence

 

82) Carton Life is an insurance firm. The firm wants to enter an Asian country that recently removed protectionist barriers in the insurance industry. The company wants to enter the country with the help of a local firm. However, the company does not want to permanently integrate with another firm. Which of the following arrangements is most suited for this company?

  1. A) amalgamation
  2. B) acquisition
  3. C) merger
  4. D) joint venture
  5. E) strategic alliance

 

83) Which of the following statements is true of strategic alliances?

  1. A) Establishing strategic alliances have more legal requirements than mergers and acquisitions.
  2. B) Strategic alliances attract more work than other forms of business.
  3. C) Strategic alliances are not an effective way to collaborate.
  4. D) Establishing strategic alliances involves more risks than other forms.
  5. E) Strategic alliances don’t create a unified entity with a single management structure.

 

84) Joint ventures ________.

  1. A) let companies create tightly integrated operations
  2. B) are less risky compared to strategic alliances
  3. C) are riskier to a firm than formal mergers
  4. D) disrupt the original companies and their business
  5. E) would not help companies gain credibility in new fields

 

85) A company decides to establish a relationship with a local company in order to better its business in a foreign country. The company must choose joint ventures ahead of mergers and acquisitions if it wants to ________.

  1. A) establish a company that is totally different
  2. B) create a single management structure
  3. C) create a unified business structure
  4. D) establish a well-structured arrangement
  5. E) avoid disrupting the original companies too much

 

 

86) Compare and contrast sole proprietorships and general partnerships.

 

 

87) Explain the advantages of operating as a sole proprietorship.

 

88) Compare and contrast a general partnership and a limited partnership.

 

89) Compare and contrast a master limited partnership and a limited liability partnership.

 

90) A group of friends is planning to start a business. Should they form a formal contract to establish themselves as a partnership? Elucidate the legal and practical aspects of this issue.

 

91) Compare and contrast private corporations and public corporations.

 

92) You work for a European company that is planning to launch business in the United States.

 

93) Explain the major disadvantages of incorporating a business as a corporation.

 

94) Compare and contrast a limited liability company and a benefit corporation.

 

95) Select an organization of your choice. Construct a model that shows the corporate governance structure of the organization.

 

 

96) What is shareholder activism?

 

 

97) Explain the role of corporate officers in corporate governance.

 

98) Compare and contrast mergers and acquisitions.

 

99) Compare the three common types of mergers.

 

100) Distinguish between strategic alliances and joint ventures.

 

 

Chapter 6   Entrepreneurship and Small Business Ownership

 

Business in Action, 6e (Bovee/Thill)

Chapter 6   Entrepreneurship and Small Business Ownership

 

1) Among all firms that apply for U.S. patents on new inventions, small businesses receive 13 times more patents per employee than larger firms.

 

 

2) A 12-empoyee executive recruiting firm making $750,000 per year would be a small business.

 

 

3) Lifestyle businesses are small only because they are new and have ambitious plans to grow.

 

 

4) Business start-ups decline when the economy sours.

 

5) Outsourcing reduces opportunities for small businesses and entrepreneurs.

 

 

 

6) The practice of engaging outside firms to handle either individual projects or entire business functions is called downsizing.

 

 

 

7) Intrapreneurship is a term coined by business consultant Gifford Pinchot to designate entrepreneurial efforts within a larger organization.

 

 

8) In large organizations, mechanisms put in place to prevent mistakes can also hamper innovative thinking by restricting people to tried-and-true methods.

 

9) Compared to starting a new business, buying an existing business can involve more work and more risk.

 

10) Financing a business you are starting from scratch is often easier than financing an existing business

 

 

11) A business plan summarizes the proposed business venture, goals, and plans for achieving those goals.

 

 

12) The start-up schedule section in a business plan would forecast its income, expenses, and cash flow for the first 3 years of business.

 

 

13) In the business plan, the exit strategy explains how and when the owner will close her business.

 

14) Motivational collapse occurs when the would-be entrepreneur encounters one too many setbacks and simply doesn’t have the drive to keep going.

 

 

15) SCORE is an acronym for the Service Corps of Retired Entrepreneurs.

 

 

16) An advisory board is a form of “group mentoring” in which you assemble a team of people with subject-area expertise or vital contacts to help review plans and decisions.

 

17) Unlike a corporate board of directors, an advisory board has legal responsibilities.

 

18) Facilities that house small businesses and provide support services during the company’s early growth phases are called angel investors.

 

19) The first infusion of capital that a business receives is called seed money.

 

20) Angel investors provide money to finance new businesses in exchange for a large rate of interest.

 

21) Funding a business with credit cards or a personal line of credit is extremely risky.

 

 

 

22) When companies go public, they put out an IPO, or independent public offering.

 

 

23) Baskin-Robbins gives its franchisees the right to resell its trademarked goods that must be purchased from Baskin-Robbins. This is an example of a product franchise.

 

24) If you invest in a successful franchise, you know you are getting a viable business model, one that has worked many times before.

 

25) If customer demand for the goods or services sold by your franchise changes, you have the ability to quickly adapt your business in response.

 

 

26) A small business is defined as a company that ________.

  1. A) is newly launched and has fewer than 100 shareholders
  2. B) is dominant in its field and employs fewer than 1,500 employees
  3. C) has revenue of less than $750,000
  4. D) is independently owned and operated and not dominant in its field
  5. E) is funded through personal lines of credit and has fewer than 1,000 employees

 

 

27) Which of the following is true about a small business?

  1. A) A small business is one which employs between 500 to 1000 employees.
  2. B) A small business is usually funded by personal lines of credit, and not through bank loans and microlenders.
  3. C) A small business is one that is not dominant in its field.
  4. D) A small firm usually curtails the freedom to innovate.
  5. E) A small firm avoids risks that larger firms are willing to take.

 

28) Which of the following is an example of a lifestyle business?

  1. A) A paper recycling unit that employs about 800 employees.
  2. B) A self-employed landscape designer.
  3. C) Nature’s Delights, an international gourmet food chain that is considered to be the world’s leading retailer of natural and organic foods.
  4. D) Museum of Fine Arts, a government-funded museum that houses a collection of 19th and 20th century American, German, and French paintings.
  5. E) Freedom Books, a firm that is the leader in the English-language book publishing sector.

 

 

29) Barbara owns a small florist shop that employs a couple of part-time floral designers. She doesn’t expect her business to grow much, but it provides her with a comfortable income and she enjoys what she does. Barbara’s business would be described as a ________.

  1. A) mid-size enterprise
  2. B) retail business
  3. C) lifestyle business
  4. D) high-growth venture
  5. E) service business

 

30) One of the general characteristics of a small business is that it typically sells fewer products ________.

  1. A) to a larger customer base
  2. B) to fewer market segments
  3. C) to foreign companies
  4. D) at lower costs to government agencies
  5. E) at higher costs

 

31) Which of the following is true regarding high-growth ventures?

  1. A) They are usually run by one individual rather than a team.
  2. B) They refer to businesses such as a self-employed consultant, a corner florist, or a small e-commerce venture.
  3. C) They are mostly family businesses.
  4. D) They are are built around the personal and financial needs of an individual.
  5. E) They expand rapidly by obtaining a sizable supply of investment capital.

 

 

32) Small companies tend to differ from large ones because ________.

  1. A) they have a wider focus compared to larger companies
  2. B) they are mostly launched with more financial backing than larger companies
  3. C) they have less freedom to innovate and move quickly compared to larger companies
  4. D) they can react to market changes and make decisions more quickly than larger companies
  5. E) they are more bureaucratic compared to larger companies

 

33) Three factors contributing to the increased number of small businesses are technologies such as e-commerce, growing diversity in entrepreneurship, and ________.

  1. A) downsizing and outsourcing
  2. B) increased ease in going public
  3. C) nationalization
  4. D) market regulation
  5. E) monopolistic business practices

 

 

34) TechPoint, a technical writing and business documentation firm, finds it difficult to handle its training requirements. The company forms a one-year contract with Impact Inc., a language training firm, to conduct training and refresher courses for their employees. This is an example of ________.

  1. A) downsizing
  2. B) outsourcing
  3. C) vertical integration
  4. D) market penetration
  5. E) diversification

 

35) Technical Solutions Inc., a leading software solutions firm in Dallas with 1000 employees, is facing a financial crunch because of the economic downfall. Several of its key investors have backed out, and it has lost some projects to its competitors. The SEO of the company considers cost-cutting measures to turn around the organization. An analysis of the situation reveals that many of its employees have become redundant as their work roles have reduced considerably. The firm also employs a large number of people who are almost at the retirement age. Which of the following measures will be most appropriate for the company, from a business perspective?

  1. A) downsizing
  2. B) vertical integration
  3. C) outsourcing
  4. D) diversification
  5. E) market penetration

 

36) The positive, forward-thinking desire to create a profitable, sustainable business is called ________.

  1. A) optimism
  2. B) entrepreneurial spirit
  3. C) fiscal discipline
  4. D) marketing strategy
  5. E) business implementation

 

37) Which of the following is a quality that a successful entrepreneur is most likely to have?

  1. A) unwillingness to take risks
  2. B) unwilling to make any sacrifices in other areas of life
  3. C) high need to be motivated by an external agent
  4. D) always measures success in strictly financial terms
  5. E) views failure as a chance to grow

 

 

38) Todd D. Morrison is the manager of an advanced research team at LCM Inc., a pharmaceutical company. Todd is keen to introduce process improvements aimed at making the business unit more profitable. He also uses innovative leadership methods, such as giving team members greater flexibility and freedom. Todd takes direct responsibility for turning an idea into a profitable finished product through assertive risk-taking and innovation. Todd Morrison’s efforts are an example of ________.

  1. A) intrapreneurship
  2. B) outsourcing
  3. C) downsizing
  4. D) vertical integration
  5. E) horizontal integration

 

39) Intrapreneurship refers to ________.

  1. A) entrepreneurial efforts within a larger organization
  2. B) starting a business by buying into a franchise system
  3. C) starting a business by buying an existing independent business
  4. D) individuals who are responsible for strategic corporate social responsibility activities within an organization
  5. E) the processes, customs, policies, laws, and institutions which have impact on the way a company is controlled

 

 

40) Which of the following is most likely to encourage entrepreneurship?

  1. A) inability to find attractive employment anywhere else
  2. B) increased market regulations
  3. C) inadequate protection of property rights
  4. D) excessive market regulation
  5. E) monopolistic business practices

 

 

41) Which of the following statements is true about intrapreneurship?

  1. A) It increases bureaucracy and hinders innovation.
  2. B) It refers to individuals who start new, independent businesses.
  3. C) It refers to individuals who start a business by buying into a franchise system.
  4. D) It involves working with tried-and-true methods.
  5. E) It can be risky behavior that may or may not be rewarded.

 

42) Barbara decided to open an independent bookstore. However, after careful consideration, she decided to purchase an existing book shop called BookStop from an owner who was retiring. Which of the following statements, if true, is most likely to make Barbara’s business successful.

  1. A) Barbara decides to change the layout of the bookstore and repaint the walls.
  2. B) The government increases the taxes on small businesses.
  3. C) Barabara decides to reduce the freedom given to the existing employees by the previous owner of BookStop.
  4. D) Barabara does not like the existing business processes and systems, so she decides to build them from scratch.
  5. E) BookStop was a profitable business with many loyal customers.

 

 

 

43) Which of the following is true about creating a new, independent business?

  1. A) The possibility for borrowing start-up capital or getting investors is more, compared to buying an existing business.
  2. B) The owner’s freedom is less, compared to buying an existing business.
  3. C) The business processes and systems are usually already in place.
  4. D) The workforce is usually already in place.
  5. E) The customer base must be built from the ground up.

 

44) Matthew decides to open a cafe in his neighborhood, called Coffee Beans. While analyzing the start-up options, he decides against buying an existing independent business, or even buying into a franchise system. Because of a recent reduction in the availability of loans to entrepreneurs, he is unable to get a bank loan. He is likely to have which of the following benefits?

  1. A) He will have an established brand recognition.
  2. B) Since business processes and systems are usually in place, he need not create them.
  3. C) Support networks are already in place, so he need not update them.
  4. D) He need not hire and train the workforce at his own expense.
  5. E) He will experience very high freedom and flexibility.

 

 

45) Which of the following is an advantage of buying into a franchise system?

  1. A) It comes with an established business system.
  2. B) It comes with a workforce.
  3. C) It already has a customer base with ongoing sales.
  4. D) It allows the owner to have a very high level of freedom.
  5. E) It requires the owner to establish brand recognition from scratch.

 

46) A business plan is a written document that summarizes the ________.

  1. A) business’ cost benefit analysis
  2. B) business’ sources of finances for the business
  3. C) proposed business venture, goals, and plans for achieving those goals
  4. D) personal financial statements of the business owners
  5. E) organization’s exposure to internal and external threats

 

47) Preparing a business plan serves which of the following functions?

  1. A) It assists the owners in preparing publicity releases for the business.
  2. B) It helps persuade lenders and investors to finance the business.
  3. C) It identifies sources of potential employees for the business.
  4. D) It fulfills the requirements set forth by the Small Business Administration.
  5. E) It meets licensing regulations established by the local government.

 

48) A business plan outlines that investors will be able to sell their investment through a public stock offering, or a buyback of the investors’ interest. This is an example of which of the following elements of a business plan?

  1. A) start-up schedule
  2. B) operations plan
  3. C) exit strategy
  4. D) marketing strategy
  5. E) target market

 

 

49) Which of the following statements is true regarding the failure rates of new businesses?

  1. A) It is possible to calculate a precise figure that represents all types of businesses across all industries.
  2. B) The definition of “failure” remains the same across businesses and business owners.
  3. C) Establishing a time frame is not essential for a failure rate to have any meaning.
  4. D) Structural changes in the economy are unrelated to the failure rates of new businesses.
  5. E) The failure rate of new businesses is usually high during the first year.

 

50) At the federal level, small businesses can apply for loans backed by the ________.

  1. A) Center for Emerging Technologies
  2. B) U.S. Chamber of Commerce
  3. C) Service Corps of Retired Executives
  4. D) Venture Capitalists Association (VCA)
  5. E) Small Business Administration

 

 

51) Which of the following statements is true about the Service Corps of Retired Executives (SCORE)?

  1. A) It is a resource partner of the SBA.
  2. B) It works on a contractual basis with large businesses.
  3. C) It offers advice and one-to-one counseling to entrepreneurs, in return for company shares.
  4. D) It offers resources and programs to minority-owned businesses.
  5. E) It hires retired executives to work as consultants for a nominal fee.

 

52) SCORE is a resource partner of the ________.

  1. A) Small Business Online Community
  2. B) Minority Business Development Agency
  3. C) Small Business Administration
  4. D) United States Chamber of Commerce
  5. E) Center for Emerging Technologies

 

53) A(n) ________ is a form of “group mentoring” in which you assemble a team of people with subject-area expertise or vital contacts to help review plans and decisions.

  1. A) advisory board
  2. B) business incubator
  3. C) venture capitalist
  4. D) angel investor
  5. E) micro lender

 

54) An advisory board differs from a corporate board of directors, because ________.

  1. A) an advisory board has legal responsibilities
  2. B) you don’t have to incorporate to establish an advisory board
  3. C) you usually require high amounts of financial compensation to consult an advisory board
  4. D) members of an advisory board lack subject-area expertise
  5. E) advisors are required to obtain certification from SBA

 

 

55) ________ are centers that provide a small business with a wide array of support resources and services during its early growth phase.

  1. A) Seed centers
  2. B) Business incubators
  3. C) Microlenders
  4. D) Angel investors
  5. E) Intrapreneurs

 

56) In exchange for a small share of ownership, KMC Group makes a small investment in TechPro, a new, independent software firm. KMC Group provides support to TechPro during its early stages by helping the founders refine their ideas, hire suitable employees and train them, establish connections with industry insiders, and deal with legal issues. KMC Group is most likely to be a(n) ________.

  1. A) advisory board
  2. B) mentor
  3. C) business incubator
  4. D) seed center
  5. E) microlender

 

 

 

57) Money used or needed to set up a new business is ________.

  1. A) an incubator fund
  2. B) seed money
  3. C) an initial public offering
  4. D) public financing
  5. E) an advisory board loan

 

58) ________ is a combination of private and public financing, in which an entrepreneur invites people to fund a share of a new business venture or a new product.

  1. A) Crowdfunding
  2. B) Microlending
  3. C) Angel investment
  4. D) Business incubator
  5. E) Threshold pledge system

 

59) Keri Sears uses the funding platform Kickstarter to solicit money to start a not-for-profit organization that promotes folk musicians and revives interest in the folk and traditional forms of music in America. She invites people to fund the business project and she states that donors will be honored on the organization’s website. She sets a six month goal to raise the money. Keri is using which of the following forms of financing?

  1. A) angel investors
  2. B) business incubator
  3. C) threshold pledge system
  4. D) fund and release system
  5. E) crowdfunding

 

60) ________ are organizations, often not-for-profit, that lend smaller amounts of money to business owners who might not qualify for conventional bank loans.

  1. A) Angel groups
  2. B) Venture capitalists
  3. C) Angel investors
  4. D) Microlenders
  5. E) Franchises

 

61) Investors who provide money to finance new businesses or turnarounds in exchange for a portion of ownership, with the objective of reselling the business at a profit are called ________.

  1. A) angel investors
  2. B) microlenders
  3. C) venture capitalists
  4. D) advisory boards
  5. E) business incubators

 

62) Private individuals who put their own money into start-ups, with the goal of eventually selling their interest for a profit, are called ________.

  1. A) angel investors
  2. B) microlenders
  3. C) venture capitalists
  4. D) advisory boards
  5. E) business incubators

 

 

63) Funding a new business with credit cards or a personal line of credit ________.

  1. A) is the least expensive form of financing
  2. B) is subject to a lot of bureaucratic procedures
  3. C) involves minimum amount of risk
  4. D) is used by very few entrepreneurs
  5. E) is a widely available form of financing

 

64) Which of the following statements is true about venture capitalists?

  1. A) They are private individuals without specialized investment skills.
  2. B) They make investments in large, established businesses.
  3. C) They usually make investments in low-risk, low-potential areas.
  4. D) They simply provide money to new ventures, and do not provide managerial advice.
  5. E) They are extremely focused and selective while investing in companies.

 

 

65) Which of the following is a major difference between banks and venture capitalists as categories of private financing?

  1. A) Unlike banks, which recruit investment specialists, venture capitalists are private investors without any specialized investment skills.
  2. B) Unlike banks, which provide investment for high-risk businesses, venture capitalists won’t lend money to a start-up that hasn’t established a successful track record.
  3. C) Unlike banks, which dont require collateral, venture capitalists provide investments only when an entrepreneur puts up marketable collateral.
  4. D) Unlike banks, which only provide money, venture capitalists also provide management expertise.
  5. E) Unlike banks, which are extremely focused and selective in giving loans, venture capitalists are less focused and provide loans to a large number of start-ups.

 

66) Unlike venture capitalists, angel investors tend to ________.

  1. A) invest larger amounts of money in start-ups
  2. B) remain involved with the company for a very short time
  3. C) have a more local focus
  4. D) be investment specialists with an extremely focused and selective approach
  5. E) invest mostly in high-potential areas

 

67) The institution that actually provides the money for an SBA-backed loan is the ________.

  1. A) venture capitalist
  2. B) bank
  3. C) SBIC
  4. D) business incubator
  5. E) IPO

 

 

68) A corporation’s first offering of shares to the public is called ________.

  1. A) private placement
  2. B) secondary market offering
  3. C) secondary equity offering
  4. D) IPO
  5. E) crowdfunding

 

 

69) Celera Inc., a soap manufacturing firm based in Colorado, needs to raise capital to fund its product development plans. The firm decides to offer its shares of ownership to the public for the first time, and lists its securities on a public exchange. This is termed as ________.

  1. A) private placement
  2. B) secondary market offering
  3. C) secondary equity offering
  4. D) IPO
  5. E) crowdfunding

 

70) A company that licenses elements of its business system to other companies is called a ________.

  1. A) franchisor
  2. B) venture capitalist
  3. C) angel investor
  4. D) intrapreneur
  5. E) business mentor

 

 

71) A(n) ________ enables the buyer to use a larger company’s trade name and sell its goods or services in a specific territory.

  1. A) trademark
  2. B) franchise
  3. C) initial public offering
  4. D) open source contract
  5. E) network effect

 

72) You have decided to open a pet store and signed an agreement with Dogz-N-Catz Centers Inc. You and the company have drawn up an agreement that allows you to use the Dogz-N-Catz name and its business format, to receive training, and to use its advertising materials. Under this agreement, Dogz-N-Catz Inc. is the ________.

  1. A) franchisor
  2. B) microinvestor
  3. C) angel investor
  4. D) venture capitalist
  5. E) business mentor

 

73) A car dealer in Ohio has the rights to sell trademarked automobiles manufactured by Armadillo Motors Inc., which does not have a distribution network in Ohio. The car dealer purchases the automobiles from Armadillo Motors Inc. and then resells them in Ohio. Which of the following models does the dealer use?

  1. A) product franchise
  2. B) joint venture
  3. C) shakeout
  4. D) vertical integration
  5. E) intrapreneurship

 

74) R&M Group, a consumer products company based in Libya, conducted a market research. The research indicated that there was a lack of branded soft drinks in the market, even though there were several local soft-drink manufacturers. The company purchased the right to produce and distribute soft drinks of Fizzpop Inc.(a leading U.S. based soft-drinks firm) R&M Group also sources the supplies from Fizzpop Inc. to ensure that the taste of the product remains the same. In this scenario, which of the following business methods does R&M Group use?

  1. A) joint venture
  2. B) shakeout
  3. C) vertical integration
  4. D) manufacturing franchise
  5. E) delayering

 

75) Andy, an entrepreneur, plans to open a bakery in his neighborhood. He realizes that there are no branded bakeries in the locality, even though there are a number of independent bakeries. He approaches Soft Bakes, an international bakery chain, and signs an agreement with them that gives him the right to open a bakery shop that uses Soft Bakes’ name and management methods. In this scenario, which of the following business methods does Andy use?

  1. A) business-format franchise
  2. B) joint venture
  3. C) shakeout
  4. D) vertical integration
  5. E) delayering

 

76) Define a small business? What is the economic role of small businesses?

 

77) Compare and contrast lifestyle businesses with high-growth ventures.

 

78) Compare and contrast small companies with large ones?

 

79) How do downsizing and outsourcing influence the number of small businesses?

 

80) Describe the qualities of a successful entrepreneur. How is an intrapreneur different from an entrepreneur? What are the unique challenges faced by an intrapreneur?

 

81) Compare and contrast creating a new, independent business with buying an existing independent business.

 

82) Compare and contrast creating a new, independent business with buying into a franchise system.

 

 

83) What is a business plan? How is it different from an executive summary?

 

84) Briefly describe what a business plan is and discuss its importance in starting a business.

 

 

85) Compare and contrast business partners with mentors and advisory boards as sources of advice and support for entrepreneurs?

 

86) Compare and contrast business incubators with networks and support groups as sources of advice and support for entrepreneurs?

 

87) Identify and briefly describe at least 3 sources of financial aid that are available to small businesses.

 

88) Discuss banks and microlenders as sources of private financing. How does it differ from seeking funds by going public?

 

89) Compare and contrast venture capitalists with angel investors.

 

90) From the perspective of the franchisee, list 3 advantages and 3 disadvantages of buying a franchise.

 

 

Chapter 7   Management Roles, Functions, and Skills

 

Business in Action, 6e (Bovee/Thill)

Chapter 7   Management Roles, Functions, and Skills

 

1) Management is the process of planning, organizing, leading, and controlling to meet organizational goals.

 

 

2) High-level managers rely heavily on subordinates to collect, analyze, and summarize information.

 

 

3) The executive dashboard is a tool that provides quick-read summaries of vital performance variables.

 

 

4) Setting the prices of new products is a fairly routine decision that managers make.

 

5) Selecting an individual for employment from a pool of job applicants is an example of an interpersonal role of management.

 

 

6) A mission statement is a statement of the operational goals of the organization.

 

 

7) A vision statement is a brief description of a company’s present status in the market.

 

 

8) A value statement does not establish expectations for an organization’s employees.

 

9) Strengths and weaknesses are internal factors that contribute to a company’s success or failure.

 

 

10) An economic slowdown is viewed as a weakness in the SWOT analysis of a firm.

 

11) Qualitative managerial forecasts are based on historical data and involve complex statistical computations.

 

 

12) A goal is a broad, long-term accomplishment that an organization wants to achieve.

 

13) Organizing is the process of arranging resources to carry out an organization’s plans.

 

 

14) A management pyramid is used to exhibit managerial roles without defining a corporate hierarchy.

 

15) Middle managers establish the structure for an organization as a whole.

 

16) First-line managers are those at the lowest level of the management hierarchy.

 

17) Leading is the process of influencing and motivating people to work willingly and effectively toward common goals.

 

 

18) Cognitive intelligence is a measure of a person’s awareness of and ability to manage his or her own emotions.

 

19) Socially adept managers have a knack for finding and building common ground with people of all kinds.

 

 

20) Autocratic leaders allow subordinates to make all the decisions concerning their performance.

 

21) A manager completely hands over operational decision making to her subordinates. This manager is a democratic leader.

 

 

22) Mentoring is the process of establishing a short-term relationship between a senior member and a junior member.

 

23) A mentor is usually an experienced manager or employee who can help guide other managers and employees.

 

 

24) Organizational culture refers to a set of shared values and norms that support the management system and that guide management and employee behavior.

 

 

25) Controlling is the process of motivating employees to be committed toward the organization’s values.

 

 

26) Standards refer to the criteria against which performance is measured.

 

 

27) Quality is a measure of how productive an organization’s employees are.

 

28) Conceptual skills refer to the ability and knowledge to perform the mechanics of a particular job.

 

29) Managerial roles are grouped into three main categories: interpersonal, decisional, and ________.

  1. A) directive
  2. B) instructional
  3. C) operational
  4. D) informational
  5. E) differential

 

 

30) Providing leadership to employees is an example of a(n) ________ role of management.

  1. A) interpersonal
  2. B) communicative
  3. C) instructional
  4. D) decisional
  5. E) informational

 

31) A top executive reads summaries of vital performance variables in the organization using the executive dashboard. The executive is performing the ________ role in this case.

  1. A) interpersonal
  2. B) instructional
  3. C) directional
  4. D) decisional
  5. E) informational

 

 

32) A(n) ________ is a tool that provides quick-read summaries of vital performance variables.

  1. A) executive dashboard
  2. B) business plan
  3. C) benchmark
  4. D) budget plan
  5. E) managerial pyramid

 

33) Choosing a candidate from several job applicants is an example of the ________ role of managers.

  1. A) interpersonal
  2. B) instructional
  3. C) collaborative
  4. D) decisional
  5. E) informational

 

34) Robert is the manager of a departmental store. Which of the following is an example of a decisional role that he has to undertake?

  1. A) communicating with the top management
  2. B) training the new employees in the store
  3. C) performing operational tasks in the store
  4. D) motivating employees to serve customers better
  5. E) setting the prices of the products in the store

 

35) Charles is the CFO of a manufacturing organization. When determining how much money should be allocated to each departmental budget, he is performing the ________ role of management.

  1. A) informational
  2. B) decisional
  3. C) instructional
  4. D) communicative
  5. E) interpersonal

 

 

36) Developing strategies, establishing goals and objectives for the organization, and translating those strategies and goals into action plans is part of the ________ function of management.

  1. A) leading
  2. B) organizing
  3. C) intermediating
  4. D) motivating
  5. E) planning

 

37) ________ plans outline the firm’s long-range (often two to five years) organizational goals and set a course of action the firm will pursue to reach its goals.

  1. A) Tactical
  2. B) Operational
  3. C) Strategic
  4. D) Short-term
  5. E) Contingency

 

 

38) A ________ is a brief declaration of what the organization aims to accomplish for customers, investors, and other stakeholders.

  1. A) operational plan
  2. B) mission statement
  3. C) SWOT statement
  4. D) tactical plan
  5. E) values statement

 

 

39) A(n) ________ is a brief and inspirational expression of what a company aspires to be.

  1. A) tactical plan
  2. B) values statement
  3. C) operational plan
  4. D) vision statement
  5. E) summary of objectives

 

40) “Do what’s right, respect others, care for customers, and perform with excellence.” This is likely to be an organization’s ________ statement.

  1. A) vision
  2. B) operational
  3. C) tactical
  4. D) values
  5. E) mission

 

41) Which of the following is an example of a strength that companies possess?

  1. A) prospective merger candidates
  2. B) lack of regulations
  3. C) respected brand
  4. D) narrow customer base
  5. E) increasing demand for products

 

.

 

42) Which of the following refers to a strength that Alfa Knowledge possesses?

  1. A) The company has an early mover advantage in the market that it is operating.
  2. B) The company is functioning in a low-growth industry.
  3. C) The company has a patented technology for knowledge management.
  4. D) The company is functioning in a high-growth industry.
  5. E) The countries in which the company is operating were not affected by the economic slowdown of 2009.

 

43) Which of the following describes a weakness that Alfa Knowledge has?

  1. A) The company’s sales were affected by the nuclear disaster that took place in Japan.
  2. B) The company functions in countries that lack skilled labor.
  3. C) The company spends huge money to pay for tariffs and duties.
  4. D) The company often incurs loses due to fluctuating exchange rates.
  5. E) The company’s employees are not committed to be with the company for long.

 

 

44) Which of the following is an opportunity available to Alfa Knowledge?

  1. A) having strong financial resources
  2. B) having a respected brand
  3. C) having committed employees
  4. D) presence of potential partners
  5. E) presence of strong management professionals in the company

 

45) The demand for Alfa’s products has been shrinking in recent times. This is considered a(n) ________ for the company.

  1. A) weakness
  2. B) limitation
  3. C) internal flaw
  4. D) opportunity
  5. E) threat

 

46) RSX Plastic is an Asian company that manufactures commercial plastic products. The company plans to open a production facility in the United States. In order to enter the U.S. market, the company is required to set up a plastic recycling plant that attracts huge fixed costs. This requirement is an example of a(n) ________ for the company.

  1. A) opportunity
  2. B) weakness
  3. C) strength
  4. D) threat
  5. E) internal limitation

 

47) A(n) ________ is a specific, short-range target or aim.

  1. A) mission
  2. B) tactic
  3. C) strategy
  4. D) objective
  5. E) vision

 

 

48) In order to be effective, a business goal should be ________.

  1. A) broadly defined
  2. B) measurable
  3. C) time unlimited
  4. D) remotely defined
  5. E) substantially high

 

49) The overall plan might be supported at the next level down by such plans as research and development plan, manufacturing plan, and marketing plan. Such functional plans are called ________ plans.

  1. A) appraisal
  2. B) strategic
  3. C) contingency
  4. D) tactical
  5. E) corporate

 

 

50) Which of the following statements is true of tactical plans?

  1. A) Tactical plans vary by company and business function.
  2. B) These plans refer to the strategic plans of organizations.
  3. C) Tactical plans are prepared for long-term purposes.
  4. D) Tactical plans cover all functions in an organization.
  5. E) Operational issues are not covered under tactical plans.

 

51) ________ is the process of arranging resources to carry out an organization’s plans. It is one of the major functions of managers.

  1. A) Planning
  2. B) Directing
  3. C) Organizing
  4. D) Analyzing
  5. E) Controlling

 

52) Which of the following functions is typically performed by top managers?

  1. A) establishing the structure for the organization
  2. B) supervising lower-level managers
  3. C) translating strategic goals into actions
  4. D) putting the systems and resources in place
  5. E) translating strategic objectives into the actions

 

53) Which of the following is a typical role of middle managers in an organization?

  1. A) defining the strategic orientation of the organization
  2. B) supervising workers on an assembly line
  3. C) supervising knowledge workers
  4. D) making long-range plans for the organization
  5. E) translating strategic goals and objective into actions

 

54) Josephine is an employee supervisor in a manufacturing firm. She supervises a small group of assembly workers on one of her company’s assembly lines. Josephine is a(n) ________ manager.

  1. A) upper-level
  2. B) top
  3. C) first-line
  4. D) middle
  5. E) executive level

 

55) ________ is the process of influencing and motivating people to work willingly and effectively toward common goals.

  1. A) Organizing
  2. B) Leading
  3. C) Planning
  4. D) Directing
  5. E) Controlling

 

 

56) ________ intelligence involves reasoning, problem solving, memorization, and other rational skills.

  1. A) Cognitive
  2. B) Emotional
  3. C) Social
  4. D) Collaborative
  5. E) Networking

 

57) A manager has the capability of reducing his disruptive impulses and moods. He also has the ability to understand others’ feelings. These capabilities are indicative of ________.

  1. A) low cognitive intelligence
  2. B) high degree of autocracy
  3. C) low social intelligence
  4. D) high emotional intelligence
  5. E) high cognitive intelligence

 

58) Socially adept managers will have a knack for ________.

  1. A) solving problems quickly using their reasoning abilities
  2. B) exhibiting rational skills to make high-quality decisions
  3. C) controlling their own emotions and impulses
  4. D) judging others based on a variety of objective parameters
  5. E) finding and building common ground with people of all kinds

 

59) Danielle has an innate ability to solve interpersonal issues that the employees face and she is always considerate toward her subordinates. She is capable of coordinating with different types of employees in the organization. Danielle has high ________ intelligence.

  1. A) informational
  2. B) cognitive
  3. C) critical
  4. D) social
  5. E) emotional

 

 

60) Under ________ leadership, subordinates have little or no freedom to make decisions, deviate from plans, or provide contrary input.

  1. A) democratic
  2. B) autocratic
  3. C) laissez-faire
  4. D) transformational
  5. E) participative

 

61) Arthur is a plant supervisor at Skyline Constructions. Twenty construction workers report to Arthur. Arthur provides them the work designs and schedules every week and does not allow them to make any changes to the schedule. Workers often complain that he is not receptive to suggestions from them. Arthur is following ________ leadership in this case.

  1. A) transformational
  2. B) autocratic
  3. C) democratic
  4. D) laissez-faire
  5. E) participative

 

 

62) ________ leaders act as advisors and supporters and generally let subordinates chart and adjust their own course toward meeting agreed-upon goals and objectives.

  1. A) Participative
  2. B) Consultative
  3. C) Autocratic
  4. D) Transactional
  5. E) Laissez-faire

 

63) You have been working under the same manager for nearly a year and have been allowed to do your job with almost no interference from your manager. The manager’s only concern seems to be that you are efficient and productive and meet your goals. Since this manager surrenders most of her responsibility to her subordinates, she would be referred to as a(n) ________ leader.

  1. A) democratic
  2. B) transactional
  3. C) autocratic
  4. D) laissez-faire
  5. E) authoritarian

 

 

64) Julia is the product manager of an automobile manufacturer. She allots part of her duties to her subordinates and involves them when making key decisions. She is receptive to new ideas and accepts valuable ideas from others. Julia is a ________ leader.

  1. A) autocratic
  2. B) democratic
  3. C) laissez-faire
  4. D) directive
  5. E) transactional

 

65) Danny leads a team of fifteen programmers. Danny divides the project into independent modules and assigns each programmer a module. Danny tells the employees that they are responsible for the completion of the modules and he would assist them only if they need help. Identify the leadership style that Danny is following.

  1. A) democratic leadership
  2. B) directive leadership
  3. C) transactional leadership
  4. D) autocratic leadership
  5. E) laissez-faire leadership

 

 

66) The first step in managing organizational change is ________.

  1. A) monitoring continued progress of the change effort
  2. B) identifying the need for change
  3. C) reinforcing the changed behavior
  4. D) analyzing the forces acting against the change
  5. E) choosing the technique to be used in instituting the change

 

67) ________ is the management function of keeping a company’s activities on track toward previously established goals.

  1. A) Organizing
  2. B) Leading
  3. C) Planning
  4. D) Motivating
  5. E) Controlling

 

68) Directly intervening in organizational processes to improve performance is an example of the ________ function of management.

  1. A) communicating
  2. B) controlling
  3. C) planning
  4. D) organizing
  5. E) decision making

 

69) The criteria against which performance is measured are referred to as ________.

  1. A) standards
  2. B) tools
  3. C) controls
  4. D) measures
  5. E) frameworks

 

 

70) Benchmarking refers to ________.

  1. A) comparing performance results between work groups in the organization
  2. B) determining departmental standards of performance
  3. C) establishing a timeline to determine efficiency
  4. D) balancing process and performance data within the company
  5. E) comparing process and performance data from other companies

 

71) ________ is a measure of how closely a product conforms to predetermined standards and customer expectations.

  1. A) Productivity
  2. B) Yield
  3. C) Quality
  4. D) Efficiency
  5. E) Structure

 

 

72) Balanced scorecard is a method of ________.

  1. A) creating schedules for non-routine organizational tasks
  2. B) monitoring the performance from multiple perspectives
  3. C) evaluating the external threats of an organization
  4. D) documenting the strategic goals of an organization
  5. E) monitoring the external opportunities of an organization

 

73) ________ skills are required to understand others and to interact effectively with them.

  1. A) Technical
  2. B) Decisional
  3. C) Conceptual
  4. D) Administrative
  5. E) Interpersonal

 

74) ________ is the most important and pervasive interpersonal skill that managers use.

  1. A) Communication
  2. B) Evaluation
  3. C) Analytic ability
  4. D) Negotiation skill
  5. E) Technical skill

 

75) Which of the following skills refer to the ability and knowledge to perform the mechanics of a particular job?

  1. A) cognitive skills
  2. B) technical skills
  3. C) conceptual skills
  4. D) decisional skills
  5. E) organizational skills

 

76) Which of the following is the best example of a technical skill that managers must possess?

  1. A) capability of making accurate decisions on issues
  2. B) ability to get along well with the subordinates
  3. C) ability to prepare a formal profit and loss statement
  4. D) ability to collaborate well with workers
  5. E) capability to understand the relationship between parts and whole

 

77) ________ skills refer to technical skills in information gathering, data analysis, planning, organizing, and other aspects of managerial work.

  1. A) Collaborative
  2. B) Decisional
  3. C) Conceptual
  4. D) Administrative
  5. E) Interpersonal

 

 

78) Which of the following is an example of an administrative skill that managers possess?

  1. A) ability to make correct hiring decisions
  2. B) being skillful in information gathering
  3. C) being skillful in operating machines
  4. D) ability to understand others’ feeling
  5. E) having a sense of empathy with subordinates

 

79) ________ skills refer to the ability to understand the relationship of parts to the whole.

  1. A) Interpersonal
  2. B) Conceptual
  3. C) Technical
  4. D) Administrative
  5. E) Decision-making

 

80) Systems thinking ability refers to the ability to understand the relationship between components and the larger out put. Systems thinking ability is an example of a(n) ________ skill.

  1. A) interpersonal
  2. B) conceptual
  3. C) technical
  4. D) administrative
  5. E) decision-making

 

81) Managers need conceptual skills to ________.

  1. A) perform such tasks as operating a machine and preparing a financial statement
  2. B) gather information relating various managerial and non-managerial issues
  3. C) accurately perform the mechanics of a particular job
  4. D) understand other people and to interact effectively with them
  5. E) visualize elements both as complete entities on their own and as interrelated pieces of a whole

 

82) ________ skills refer to the ability to identify a decision situation, analyze the problem, weigh the alternatives, choose an alternative, implement it, and evaluate the results.

  1. A) Interpersonal
  2. B) Technical
  3. C) Administrative
  4. D) Decision-making
  5. E) Interpersonal

 

83) The first step in a decision-making process is to ________.

  1. A) generate options or alternatives
  2. B) select the best or optimum option
  3. C) recognize and define the problem
  4. D) implement the decision
  5. E) monitor the results

 

 

84) Cite an example of a person who holds a managerial position and categorize the various activities that he or she performs into informational roles, decisional roles, and interpersonal roles.

 

85) Explain the decisional roles of managers.

 

86) Compare and contrast mission statements, vision statements, and values statements.

 

 

87) Compare and contrast an organization’s strengths with opportunities.

 

88) Compare and contrast quantitative forecasts with qualitative forecasts.

 

89) Describe ‘SMART’ goals with an example.

 

90) Briefly describe the organizing function of management.

 

91) Compare and contrast the roles of top managers and middle managers.

 

92) Do you think middle managers are essential to organizations? Explain your answer.

 

93) Compare and contrast cognitive intelligence and social intelligence.

 

94) Explain how democratic leaders function.

 

95) Do you think having a positive culture is important to an organization? Explain your answer.

 

96) Consider an automobile manufacturing company that manufactures low cost cars. Construct a model of control cycle for this organization.

 

97) Explain a balanced scorecard.

 

98) Briefly explain the four basic categories of management skills.

 

99) Compare and contrast technical skills and conceptual skills.

 

100) Think of a situation where you have used decision-making skills to solve a problem. Analyze the situation based on the decision-making steps discussed in the text.

 

 

Chapter 8   Organization and Teamwork

 

Business in Action, 6e (Bovee/Thill)

Chapter 8   Organization and Teamwork

 

1) Organization structure is a framework that enables managers to divide responsibilities, ensure employee accountability, and distribute decision-making authority.

 

 

2) The diagram that shows how employees and tasks are grouped is called organizational structure.

 

 

3) The degree to which organizational tasks are broken down into separate jobs is referred to as work specialization.

 

 

4) Core competencies are those activities in which a company excels and has the potential to create competitive advantages.

 

5) The number of people under one manager’s control is that manager’s chain of command.

 

 

6) When a manager has many employees reporting directly to her, she has a narrow span of control.

 

 

7) A centralized organization concentrates decision-making authority at the upper levels of the organization.

 

 

8) Texas Motors, a car manufacturing company, groups its departments around the three lines of cars it manufactures. Each product division encompasses all the major functional resources required to achieve its goals. This indicates that Texas Motors has a functional structure.

 

9) A matrix organization uses functional and divisional patterns simultaneously.

 

 

10) Employees working in a firm with divisional structure have to get used to reporting to two bosses at the same time.

 

 

11) A network structure stretches beyond the boundaries of a company to connect a variety of partners and suppliers that perform selected tasks for a headquarters organization.

 

 

12) While a network structure can lower costs and increase a company’s flexibility, it can also leave the company vulnerable to risks such as outside contractors going out of business or offering the same goods and services to a competitor.

 

13) A team is a unit of two or more people who work together to achieve a shared goal.

 

 

14) A self-managed team requires little supervision, controls the pace of its work and determines work assignments.

 

 

15) A functional team is also known as a horizontal team.

 

 

16) A functional team is organized along the lines of the organization’s vertical structure.

 

17) A team that may become permanent in order to deal with regularly recurring tasks is called a task force.

 

18) Social networking can also help a company maintain a sense of community even as it grows beyond the size that normally permits a lot of daily interaction.

 

 

19) When people work together toward a common goal rather than competing for individual recognition, their efforts and energies tend to focus on the common good.

 

 

20) People who assume the task-specialist role focus on supporting the team’s emotional needs and strengthening the team’s social unity.

 

21) The stage of team development in which the team stabilizes and team members recognize and accept their roles and duties is called performing.

 

 

22) Informal standards of conduct that guide team behavior are called groupthink.

 

23) Conflict is a destructive force in an organization and should be avoided at all costs.

 

 

24) Destructive conflict can lead to win-lose or lose-lose outcomes, in which one or both sides lose, to the detriment of the entire team.

 

25) Unstructured organizations can be even more complex than matrix organizations because workers not only have multiple bosses but report to multiple bosses in multiple companies.

 

 

26) A diagram that shows how employees and tasks are grouped and where the lines of communication and authority flow is called a(n)________.

  1. A) positional depiction
  2. B) matrix structure
  3. C) network structure
  4. D) organization chart
  5. E) functional chart

 

27) A group of employees in American Game Technology Inc., a manufacturer of gaming machines, got together to arrange a paper recycling drive in the office. Though they came from different departments, they shared a common belief in environmentalism, and often discussed issues related to environmental conservation. This is an example of ________.

  1. A) scapegoating
  2. B) informal organization
  3. C) groupthink
  4. D) work specialization
  5. E) emotional contagion

 

 

28) A company whose structure, policies, and capabilities allow employees to respond quickly to customer needs and changes in the business environment is termed as a(n) ________.

  1. A) agile organization
  2. B) hyperspecialized organization
  3. C) formal organization
  4. D) umbrella organization
  5. E) mechanistic organization

 

 

29) Which of the following does an organization chart do?

  1. A) depicts the attrition rate in the organization
  2. B) depicts the costs incurred by the organization
  3. C) shows lines of authority in the organization
  4. D) shows the performance of the organization
  5. E) shows the growth curve of employees

 

30) ________ are those activities in which a company excels and has the potential to create competitive advantages.

  1. A) Core competencies
  2. B) Span of management
  3. C) Cost leadership
  4. D) Economies of scale
  5. E) Value chain

 

31) Another term for work specialization is ________.

  1. A) virtual organization
  2. B) chain of command
  3. C) span of management
  4. D) division of labor
  5. E) organizational structure

 

 

32) In a furniture factory, one worker cuts the wood according to the design, another worker glues and screws the pieces together, and another worker stains and polishes the wood. This is an example of ________.

  1. A) core competencies
  2. B) decentralization
  3. C) work specialization
  4. D) chain of command
  5. E) centralization

 

33) ________ is defined as a pathway for the flow of authority from one management level to the next.

  1. A) Span of management
  2. B) Span of control
  3. C) Departmentalization
  4. D) Network structure
  5. E) Chain of command

 

 

34) Which of the following chain-of-command systems was developed to address the need to combine specialization with management control?

  1. A) line organization
  2. B) line-and-staff organization
  3. C) agile organization
  4. D) formal organization
  5. E) informal organization

 

35) The number of workers who report directly to a manager is called the manager’s ________.

  1. A) chain of command
  2. B) functional structure
  3. C) divisional structure
  4. D) span of management
  5. E) task force

 

36) Ace Inc., an American multinational computer software company, has a large number of hierarchical levels. Each manager is responsible for a few employees and maintains a tight control on them. At Ace Inc., the time taken to make decisions is very high, as each decision needs to go through numerous management layers. Which of the following statements is true about the organizational structure of Ace Inc.?

  1. A) Ace Inc. has a narrow span of management.
  2. B) Ace Inc. is a flat organization.
  3. C) Ace Inc. lacks work specialization.
  4. D) Ace Inc. is a decentralized organization.
  5. E) Ace Inc. encourages employees to form self-managed teams.

 

37) In a ________ organization, a manager usually has a wide span of control.

  1. A) tall
  2. B) line
  3. C) flat
  4. D) line-and-staff
  5. E) formal

 

 

38) Organizations that focus decision-making authority near the top of the chain of command are said to be ________.

  1. A) departmentalized organizations
  2. B) centralized organizations
  3. C) unstructured organizations
  4. D) informal organizations
  5. E) flat organizations

 

39) Which of the following is true about decentralization?

  1. A) It shifts decision-making authority to top management.
  2. B) It reduces the number of overlapping capabilities.
  3. C) It inhibits responsiveness.
  4. D) It results in the creation of tall organizations.
  5. E) It pushes decision-making authority down to lower organizational levels.

 

40) At Meyer Department Store, employees are encouraged to make certain decisions without consulting their managers. For example, cashiers are allowed to make price adjustments for customers without consulting the store manager as long as the amount of the adjustment is less than $10. Meyer Department Store is most likely to have which of the following organizational structures?

  1. A) departmentalized decision making
  2. B) structured decision making
  3. C) decentralized decision making
  4. D) informal organization
  5. E) tall organization

 

 

41) Grouping people within an organization according to function, division, matrix, or network is called ________.

  1. A) departmentalization
  2. B) decentralization
  3. C) centralization
  4. D) span of control
  5. E) line-and-staff organization

 

 

42) ________ refers to the number of layers the chain of command is divided into from the top of the company to the bottom.

  1. A) Vertical structure
  2. B) Horizontal structure
  3. C) Hybrid structure
  4. D) Line structure
  5. E) Line-and-staff structure

 

 

43) ________ refers to how the various business functions and work specialties are divided across the company.

  1. A) Hybrid structure
  2. B) Line structure
  3. C) Line-and-staff structure
  4. D) Vertical structure
  5. E) Horizontal structure

 

44) Alpha Laboratories, a global pharmaceuticals company, groups its employees into several departments such as research and development, regulatory affairs, production, quality control, quality assurance, and sales & marketing. Employees are grouped by specialization to allow for the efficient use of resources and encourage the development of in-depth skills. Alpha Laboratories is most likely to have a(n) ________.

  1. A) divisional structure
  2. B) matrix structure
  3. C) functional structure
  4. D) virtual structure
  5. E) network structure

 

45) Grouping workers according to their similar skills, resource use, and expertise is called a(n) ________ structure.

  1. A) divisional
  2. B) functional
  3. C) matrix
  4. D) virtual
  5. E) network

 

46) Blackstone Stove Company has three self-contained business units that specialize in the design, manufacture and sale of cooking appliances: one business unit for microwave ovens, another for gas and electric ranges, and a third for gas grills. The business units are self-contained and enjoy great autonomy. Blackstone Stove has a ________ structure.

  1. A) matrix
  2. B) divisional
  3. C) functional
  4. D) line
  5. E) network

 

 

47) Which of the following statements is true regarding divisional departmentalization?

  1. A) It refers to grouping employees according to their skills.
  2. B) It makes the organization more rigid, and incapable of reacting quickly to change.
  3. C) It reduces the autonomy of business units.
  4. D) It results in the creation of a virtual organization.
  5. E) It can increase costs through duplication.

 

48) Grouping departments according to similarities in product, process, customer, or geography is called ________.

  1. A) network structure
  2. B) virtual structure
  3. C) matrix structure
  4. D) functional structure
  5. E) divisional structure

 

 

49) Linda, a marketing analyst at Chase Manufacturing, has been assigned to work on a new project team that includes employees from engineering, accounting, and manufacturing teams. Linda will continue to report to the marketing manager, and she will also report to the team leader for the new project team. Thus, she would be a part of a functional group as well as a project team. It would appear that Chase Manufacturing has a(n) ________ organizational structure.

  1. A) matrix
  2. B) flat
  3. C) informal
  4. D) line
  5. E) network

 

50) A structure in which employees are assigned to both a functional group and a project team simultaneously is called a(n) ________.

  1. A) network structure
  2. B) virtual structure
  3. C) matrix structure
  4. D) line structure
  5. E) informal structure

 

 

51) A ________ structure is also called a virtual organization.

  1. A) functional
  2. B) matrix
  3. C) divisional
  4. D) line
  5. E) network

 

52) Astral Inc., an office stationery manufacturing firm, has outsourced its engineering and manufacturing functions to K&M Manufacturers, a company in Singapore. It has also signed a two-year contract with Acme Solutions to handle its payroll and employee benefits functions. Astral Inc. has a small headquarters in Ohio that is electronically connected to the various firms to which it has outsourced functions. Astral Inc. is most likely to have a(n) ________.

  1. A) network structure
  2. B) divisional structure
  3. C) matrix structure
  4. D) functional structure
  5. E) informal structure

 

53) Which of the following is a characteristic of a matrix structure?

  1. A) assigning employees to functional and project teams simultaneously
  2. B) establishing a virtual structure
  3. C) relying on multiple external partners
  4. D) creating fully self-managed teams
  5. E) using shared online workspaces to provide access to information and documents

 

54) Which of the following is a defining characteristic of a problem-solving team?

  1. A) It manages its own activities and requires minimal supervision.
  2. B) It is composed of managers and employees within a single functional department.
  3. C) It is assembled to find ways of improving quality, efficiency, or other performance measures.
  4. D) It is a team that uses communication technology to bring together geographically distant employees to achieve goals.
  5. E) It typically deals with regularly recurring tasks, such as addressing employee grievances.

 

 

55) Creative Solutions, a Chicago based advertising agency, allows its team of copywriters to control the pace of work and determination of work assignments. The team is comprised only of copywriters, and team members have the freedom to make their own decisions. The firm has a strong policy against work-from-home. This is an example of which of the following forms of teams?

  1. A) cross-functional team
  2. B) virtual team
  3. C) command team
  4. D) horizontal team
  5. E) self-managed team

 

56) Which of the following is a defining characteristic of a cross-functional team?

  1. A) It manages its own activities and requires minimal supervision.
  2. B) It is is organized along the lines of the organization’s vertical structure.
  3. C) It is composed of members at two or more geographic locations.
  4. D) It is typically composed of managers and employees within a single functional department.
  5. E) It often involves some form of matrix structure.

 

 

57) Which of the following is a defining characteristic of a command team?

  1. A) It is organized along the lines of the organization’s vertical structure.
  2. B) It manages its own activities and requires minimal supervision.
  3. C) It uses communication technology to bring together geographically distant employees to achieve goals.
  4. D) It is comprised of people from several departments who are temporarily brought together to address a specific issue.
  5. E) It draws together employees from various functional areas and expertise.

 

58) Functional teams are also known as ________ teams.

  1. A) control
  2. B) cluster
  3. C) command
  4. D) community
  5. E) committee

 

59) MNB Manufacturers, a home appliances manufacturing firm, creates a team comprised of employees from research and development, finance, marketing and sales, and product assurance departments. The face-to-face team is closely scrutinized. This specialized, permanent team is responsible for generating innovative business expansion plans. It is most likely to be which of the following forms of teams?

  1. A) self-managed team
  2. B) task force
  3. C) virtual team
  4. D) cross-functional team
  5. E) command team

 

60) Which of the following is a defining characteristic of a task force?

  1. A) It is formed to work on a specific activity with a completion point.
  2. B) It is a permanent part of the organization and is designed to deal with regularly recurring tasks.
  3. C) It uses communication technology to bring together geographically distant employees to achieve goals.
  4. D) It is composed of managers and employees within a single functional department.
  5. E) It manages its own activities and requires minimal supervision.

 

61) Which of the following is a defining characteristic of a committee?

  1. A) It refers to a team of people from several departments who are temporarily brought together to address a specific issue.
  2. B) It is composed of members at two or more geographic locations.
  3. C) It typically deals with regularly recurring tasks, such as addressing employee grievances.
  4. D) It is usually composed of managers and employees within a single functional department.
  5. E) It manages its own activities and requires minimal supervision.

 

62) Which of the following is an advantage of working in a team?

  1. A) Business teams encourage groupthink.
  2. B) Teams improve flexibility and responsiveness.
  3. C) Business teams can lead to more time being spent on decisions than necessary.
  4. D) Influential teams can compete with the formal chain of command.
  5. E) Teams lower the diversity of views.

 

 

63) Uniformity of thought that occurs when peer pressures cause individual team members to withhold contrary or unpopular opinions is called ________.

  1. A) groupthink
  2. B) scapegoating
  3. C) whistle blowing
  4. D) centralization
  5. E) decentralization

 

64) Mark works in a small advertising firm as a graphic designer. He is part of a team consisting of five graphic designers

who have been working together for several years and have high group cohesiveness. The firm hires a new graphic designer who is a fresher. Mark’s team members often bully the new hire, and burden him with excessive work. Mark supports his team members due to peer pressure, even though he feels their behavior is unethical. This is an example of ________.

  1. A) whistle-blowing
  2. B) centralization
  3. C) decentralization
  4. D) groupthink
  5. E) social comparison bias

 

65) Groupthink occurs when ________.

  1. A) managers favour employees who don’t compete with their own particular strengths.
  2. B) employees judge a decision by its eventual outcome instead of based on the quality of the decision at the time it was made.
  3. C) peer pressures cause individual team members to withhold contrary or unpopular opinions.
  4. D) a team places too much importance on one aspect of an event, which causes errors in accurately predicting the utility of a future outcome.
  5. E) employees rely too heavily, or “anchor,” on one trait or piece of information when making decisions about team members.

 

66) In a team, people who focus on work-related accomplishments over human needs, and help the team reach its goals are said to assume the ________.

  1. A) task-specialist role
  2. B) nonparticpator role
  3. C) dual role
  4. D) socioemotional role
  5. E) people-oriented role

 

67) Nick is the team lead of an 8 member team of loan originators at Cooper and Co., a commercial real estate brokerage firm. He tends to focus on supporting the emotional needs of his team members. He often organizes events such as baseball games and movie nights to strengthen the social unity of his team. However, he often neglects to complete specific tasks. He is most likely to be categorized under which of the following team member roles?

  1. A) authoritarian role
  2. B) task-specialist role
  3. C) nonparticpator role
  4. D) dual role
  5. E) socioemotional role

 

68) Enid works as a customer service agent at Clarence Fashion Apparel, a New York based women’s fashion apparel and accessories store. She is often late to work, is reluctant to offer assistance to customers, and has had low performance levels for the past six months. Enid is hostile toward the other customer service agents at the shop, and does not attend any of the team activities. She is most likely to be a ________.

  1. A) nonparticpator
  2. B) task-specialist
  3. C) socioemotional contributor
  4. D) groupthink employee
  5. E) dual-role contributor

 

69) An employee who focuses on the needs of the team members over the task needs assumes the ________ role.

  1. A) nonparticipator
  2. B) socioemotional
  3. C) dual
  4. D) task-specialist
  5. E) informal

 

70) Which of the following is a characteristic of effective teams?

  1. A) groupthink is encouraged among team members
  2. B) decision making is done through quick votes
  3. C) decision making is done by the team leader
  4. D) conflict is managed by focusing on the people, not the issues
  5. E) disagreements are discussed openly and calmly

 

71) According to Bruce Tuckman’s model, in the ________ stage, conflicts are resolved, and team harmony develops.

  1. A) forming
  2. B) storming
  3. C) norming
  4. D) performing
  5. E) adjourning

 

 

72) According to Bruce Tuckman’s model, in the ________ stage of team development, members of the team are fully committed to the team’s objectives and the team achieves its full potential in terms of task accomplishment.

  1. A) forming
  2. B) storming
  3. C) norming
  4. D) performing
  5. E) adjourning

 

73) According to Bruce Tuckman’s model, the ________ stage is a period of orientation and ice-breaking, when members get to know each other.

  1. A) storming
  2. B) forming
  3. C) norming
  4. D) performing
  5. E) adjourning

 

74) Which of the following is a defining characteristic of the storming stage of Bruce Tuckman’s model of team development?

  1. A) It is a period of orientation and ice-breaking.
  2. B) It is the stage in which issues are wrapped up, and the team is dissolved.
  3. C) It is the stage in which conflicts arise as members jockey for position or form coalitions to promote their own perceptions of the team’s mission.
  4. D) It is the stage in which members come to understand and accept one another, reach consensus on who the leader is, and reach agreement on member roles.
  5. E) It is the stage when team members become acquainted with each other’s task orientation.

 

75) ________ refers to informal standards of conduct that guide team behavior.

  1. A) Norms
  2. B) Groupthink
  3. C) Etiquette
  4. D) Schemas
  5. E) Ethics

 

 

76) At DBT Enterprises, when an employee is late for a meeting, it is an informal rule that he or she must pay $2 to the “party fund.” When there is enough money in the “party fund,” the company has a pizza party. This is an example of ________.

  1. A) groupthink
  2. B) heuristics
  3. C) norms
  4. D) schemas
  5. E) ethics

 

77) Which of the following is a measure of how committed team members are to their team’s goals?

  1. A) groupthink
  2. B) vertical integration
  3. C) horizontal integration
  4. D) decentralization
  5. E) cohesiveness

 

78) An organization that doesn’t have a conventional structure, but instead assembles talent as needed from the open market, is called a(n) ________ organization.

  1. A) unstructured
  2. B) functional
  3. C) informal
  4. D) line-and-staff
  5. E) line

 

 

79) Casey is an entrepreneur who owns AZS Solutions, a software development business. Instead of using a conventional organizational structure, he signs a contract with freelance software developers for a specific project. This structure provides him the flexibility to hire freelance developers that match the requirements of specific skills required for each project. Casey’s business has which of the following organizational structures?

  1. A) functional
  2. B) informal
  3. C) unstructured
  4. D) line-and-staff
  5. E) line

 

80) Which of the following is a defining characteristic of unstructured organizations?

  1. A) It takes the virtual and networked organizational concepts to an extreme.
  2. B) It decreases division of labor and work specialization.
  3. C) It has a chain-of-command system that establishes a clear line of authority flowing from the top down.
  4. D) It involves grouping employees according to their skills.
  5. E) It involves using product divisions, grouping departments around each of the company’s products.

 

 

81) From the perspective of companies, which of the following is a potential benefit of an unstructured firm?

  1. A) Companies are more certain that they will be able to get the talent they need.
  2. B) Companies have a workforce with increased sense of loyalty.
  3. C) Companies find it easier to groom replacement managers and executives.
  4. D) Companies have clear built-in lines of accountability up and down the chain of command.
  5. E) Companies can ramp capacity up and down more quickly and with less trauma.

 

82) From the perspective of workers, which of the following is a potential benefit of working for an unstructured organization?

  1. A) increased job security
  2. B) increased loyalty toward employers
  3. C) increased freedom and flexibility
  4. D) increased sense of working together for a larger, shared purpose
  5. E) availability of full-time trainers to guide, support, and teach new skills

 

 

83) From the perspective of the company, which of the following is potential drawback of using an unstructured organization?

  1. A) less flexible capacity management
  2. B) higher fixed costs
  3. C) reduced agility
  4. D) lack of built-in accountability
  5. E) increased loyalty in employees

 

84) Unlike conventional organizations, unstructured organizations tend to ________.

  1. A) provide employees opportunity to form close bonds with co-workers
  2. B) lack clear assignments of legal or financial liability in the event of major foul-ups
  3. C) have lower flexibility in adjusting their expense levels to match revenue levels
  4. D) have clear lines of accountability up and down the chain of command
  5. E) invest in employees over months or years, giving them time and opportunities to develop deep knowledge and skills

 

85) From the perspective of workers, which of the following is a potential drawback of working for an unstructured organization?

  1. A) Worker’s evaluations are subjective and based almost entirely on the manager’s impressions.
  2. B) Workers have reduced flexibility and freedom.
  3. C) Workers lack access to more interesting and more fulfilling work.
  4. D) Workers have a sense of working with a team for a larger, shared purpose.
  5. E) Workers are left to fend for themselves and to keep their skills current at their own expense.

 

 

86) Discuss the advantages and disadvantages of work specialization.

 

87) Compare and contrast line organization and line-and-staff organization.

 

88) Define span of management. How does the span of management in flat organizations differ from that in tall organizations.

 

89) Compare and contrast centralization with decentralization.

 

90) Define the five major types of organization structure.

 

91) Compare and contrast functional structure with divisional structure.

 

92) Compare and contrast matrix structure with network structure.

 

 

93) How do teams differ from work groups?

 

 

94) What is a team? How does a functional team differ from a cross-functional team?

 

 

95) What is a virtual team?

 

 

96) Compare and contrast a task force with a committee.

 

97) What is the optimal size for teams? How does an employee who assumes a task-specialist role differ from an employee who assumes a socioemotional role?

 

98) Identify and define the stages of team development according to Bruce Tuckman.

 

99) Discuss the steps team members and team leaders can take to prevent conflicts.

 

100) Compare and contrast an unstructured organization with a conventional organization.

 

 

 

Chapter 9   Production Systems

 

Business in Action, 6e (Bovee/Thill)

Chapter 9   Production Systems

 

1) System is an interconnected and coordinated set of elements and processes that converts inputs to desired outputs.

 

 

 

2) Feedback is the information from the output applied back to the input.

 

 

 

3) Corrections will not lead to performance improvements at the leverage point.

 

 

4) A company that hires an outside firm to do its accounting and payroll function is outsourcing that function.

 

5) A firm’s suppliers are not part of its value chain.

 

6) Value webs are multidimensional networks of suppliers and outsourcing partners.

 

 

7) Outsourcing and offshoring are synonymous terms.

 

 

8) Offshoring is moving processes to markets that are closer to home in order to minimize transportation and management costs.

 

9) Inventory control refers to determining how much of what to have on hand at any given time.

 

 

10) The period of time that elapses between placing an order and actual receipt is the product’s lag time.

 

11) Estimates of future demand for a company’s products or services are referred to as production forecasts.

 

 

12) Capacity planning is not directly linked to estimation of future demand.

 

 

13) Capacity planning refers to making decisions about the arrangement of production work centers and other elements.

 

 

14) Scheduling determines how long each operation takes and deciding which tasks are done in which order.

 

 

15) PERT diagrams are bar charts that show production managers what projects are being worked on and what stage they are in.

 

 

16) In a PERT diagram, the critical path is the shortest sequence of operations.

 

17) Productivity is the measure of the efficiency at which an organization can convert inputs into outputs.

 

 

18) Lean systems are systems whose productivity is relatively low.

 

19) Making sure you have what you need no earlier than when you need it is known as just-in-time inventory management.

 

 

20) Mass production involves the creation of identical goods or services.

 

21) Identical goods or services are created in large quantities in mass customization.

 

 

22) In batch-of-one production, the producer creates a unique good or service for each customer.

 

 

23) Services that must be consumed at the same time they are produced are known as perishable services.

 

 

24) Scalability is the potential to increase production by expanding or replicating its initial production capacity.

 

25) Customer involvement tends to be more for goods than services.

 

26) Measuring quality against established standards after production is known as quality assurance.

 

 

27) Doing the job right the first time is the basic principle of quality control.

 

 

28) Kaizen calls for continuous quality improvements.

 

29) Statistical process control refers to the use of random sampling and tools, such as control charts, to monitor the production process.

 

30) ISO 9000 is a methodology used for customized production and avoids the use of standards.

 

31) In systems view, an organizational department is viewed as a(n) ________.

  1. A) serial milestone of a process
  2. B) system without outputs
  3. C) independent entity
  4. D) interconnected element
  5. E) system without inputs

 

32) Which of the following is a major difference between a line view and a circular view?

  1. A) Multiple activities are considered in a series view, unlike a circular view.
  2. B) A line view has multiple activities, unlike a circular view.
  3. C) A circular view includes feedback, unlike a line view.
  4. D) A circular view shows multiple activities, unlike a line view.
  5. E) Multiple activities are considered in a circular view, unlike a serial view.

 

 

33) Organizations can promote systems thinking by ________.

  1. A) showing people how they contribute to the overall goal
  2. B) implementing output-based individual incentives
  3. C) restricting interactions at the subsystem level
  4. D) giving them direct solutions from the top
  5. E) implementing output-based incentives for small teams

 

34) The point in a system where a small correction could improve performance is called the ________.

  1. A) break even point
  2. B) breaking point
  3. C) leverage point
  4. D) equilibrium point
  5. E) point of no return

 

35) ________ include all the elements and processes from transforming raw materials to making the final products available to the ultimate customer.

  1. A) Customer chains
  2. B) Supply webs
  3. C) Value chains
  4. D) Supply chains
  5. E) Product cycles

 

 

36) ________ refers to contracting out certain business functions or operations to other companies.

  1. A) Outsourcing
  2. B) Scaling
  3. C) Rescaling
  4. D) Customization
  5. E) External valuation

 

37) LaSalle Plating is a U.S. company that offers metal finishing services. The company used to handle employee benefit administration and payroll management in-house, but recently decided to have these functions handled by an outside firm in Chicago. Which of the following terms best refers to this new strategy adopted by the company?

  1. A) outsourcing
  2. B) leveraging
  3. C) dislocating
  4. D) offshoring
  5. E) internalization

 

 

 

38) ________ refers to transferring a part or all of a business function to a facility in another country.

  1. A) Offshoring
  2. B) Scaling
  3. C) Leveraging
  4. D) Customization
  5. E) External valuation

 

39) Gobex financial services is a multinational firm that has many branches across the globe. The U.S subsidiary of the firm assigns its accounting tasks to the Chinese subsidiary. Lower labor costs enable the Chinese firm to perform the tasks more efficiently. This is an example of ________.

  1. A) offshoring
  2. B) outsourcing
  3. C) leveraging
  4. D) customization
  5. E) external valuation

 

 

 

40) Buxus Auto is a U.S manufacturer of automobiles. The company used to procure car accessories from a firm based in China. The quality of the parts the firm was receiving from China was below par and the firm decides to stop the purchase from China and procure the accessories from a U.S. based firm. This is an example of ________.

  1. A) offshoring
  2. B) outsourcing
  3. C) leveraging
  4. D) reshoring
  5. E) external valuation

 

41) The phenomenon where U.S. companies move their production back to U.S. soil is known as ________.

  1. A) offshoring
  2. B) outsourcing
  3. C) leveraging
  4. D) reshoring
  5. E) external valuation

 

 

42) Which of the following is an advantage of offshoring?

  1. A) Hidden costs and risks are rarely involved in offshoring.
  2. B) U.S. firms can charge lower prices through offshoring.
  3. C) Offshoring is the best way to improve business agility.
  4. D) Information risks are low when offshoring services.
  5. E) Offshoring is the best way to increase customer responsiveness.

 

43) Which of the following is a legitimate disadvantage of offshoring?

  1. A) U.S. Consumers will be charged higher prices due to offshoring.
  2. B) Global trade will decline if businesses offshore processes.
  3. C) Customer responsiveness may suffer due to offshoring.
  4. D) Customers will lack choice in many industries due to offshoring.
  5. E) U.S. competitiveness will decrease if businesses offshore processes.

 

44) A supply chain ________.

  1. A) cannot be distinct for different departments
  2. B) is applicable for services rather than goods
  3. C) has only two components
  4. D) does not include end customers
  5. E) coordinates the flow of goods and materials

 

 

 

45) Supply chain management refers to the business procedures, policies, and computer systems that ________.

  1. A) separate supply chain from the value chain of an organization
  2. B) convert supply chain into a cohesive system
  3. C) separate supply chain from other business functions
  4. D) help an organization communicate with competing firms
  5. E) create a procurement process independent of the supply chain

 

 

46) Goods and materials kept in stock for production or sale are called ________.

  1. A) supplies
  2. B) inventory
  3. C) layouts
  4. D) system tools
  5. E) production intermediaries

 

47) Rolber Cycles is a manufacturer of racing bicycles. The company gives extreme importance to customer responsiveness and keeps products ready in the warehouse to deliver to customers immediately after they receive an order. These products are best referred to as ________.

  1. A) supplies
  2. B) inventory
  3. C) layouts
  4. D) system tools
  5. E) production intermediaries

 

48) ________ refers to determining the right quantities of supplies and products to have on hand and tracking where those items are.

  1. A) Customer relationship management
  2. B) Summative evaluation
  3. C) Quality control
  4. D) Inventory control
  5. E) Statistical process control

 

49) Which of the following is the main objective of engaging in inventory control?

  1. A) providing a channel for customer communication
  2. B) obtaining feedback from the customers
  3. C) providing a channel for brand communication
  4. D) balancing supply and storage costs
  5. E) storing less finished products and more raw materials

 

50) ________ refers to the acquisition of the raw materials, parts, components, supplies, and finished products required to produce goods and services.

  1. A) Procurement
  2. B) Logistics
  3. C) Operation
  4. D) Finishing
  5. E) Inventorying

 

51) Hudson Foods markets processed foods in the United States. The company obtains raw materials from small scale producers in the U.S. and Canada. This act of getting the necessary raw materials for production is called ________.

  1. A) inventorying
  2. B) operation
  3. C) finishing
  4. D) logistics
  5. E) procurement

 

 

52) The period of time between placing an order for supplies and receiving the material is called ________.

  1. A) process forecast
  2. B) run time
  3. C) lead time
  4. D) lag time
  5. E) procurement delay

 

53) Ronda Scooters is a leading Asian manufacturer of electric scooters. The company procures raw materials from a firm based in China. The Chinese supplier delivers materials in about three weeks after receiving a confirmed order. This period is referred to as the materials’ ________.

  1. A) procurement delay
  2. B) lead time
  3. C) lag time
  4. D) run time
  5. E) process forecast

 

 

54) The technology known as ________ attaches small antenna tags to products or shipping containers to help the company track where needed materials are in its supply chain.

  1. A) resource identification tags
  2. B) U-key
  3. C) ISO 9000
  4. D) just-in-time
  5. E) radio frequency identification

 

55) ________ refers to overseeing all the activities involved in producing goods and services.

  1. A) Facilities management
  2. B) Capacity planning
  3. C) Procurement
  4. D) Logistics
  5. E) Operations management

 

56) ________ refers to the arrangement of production work centers and other elements needed to process goods and services.

  1. A) Supply chain
  2. B) Facility layout
  3. C) Capacity plan
  4. D) Critical path
  5. E) Production forecast

 

57) ________ refers to establishing the overall level of resources needed to meet customer demand.

  1. A) Production planning
  2. B) Facility analysis
  3. C) Capacity planning
  4. D) Process control
  5. E) Critical path analysis

 

 

58) A rural hospital is trying to determine how many beds it should have in its emergency room. This is an example of ________.

  1. A) production scheduling
  2. B) site selection
  3. C) critical path analysis
  4. D) capacity planning
  5. E) systemic risk reduction

 

59) A bank is building a new branch in a small suburb, and one of the decisions it must make is how many teller windows it needs to serve its customers effectively and cost efficiently on an average day. This is an example of ________.

  1. A) production scheduling
  2. B) capacity planning
  3. C) site selection
  4. D) critical path analysis
  5. E) systemic risk reduction

 

 

60) John’s Apparel is a tailoring shop that manufactures custom-made dresses for special occasions and festivals. While ordering raw materials, John estimates that he would sell 500 Santa Claus lawn decorations in November. In this case john is performing a(n) ________.

  1. A) production forecast
  2. B) capacity planning
  3. C) PERT analysis
  4. D) resource planning
  5. E) critical path analysis

 

61) ________ are estimates of future demand for a company’s products.

  1. A) Operation plans
  2. B) PERT reports
  3. C) Resource plans
  4. D) Critical paths
  5. E) Production forecasts

 

62) Grinder is a manufacturer of aluminum and steel balls used in large machineries. The company periodically estimates the future demand of its products and bases manufacturing on this data. Such estimates of the company are called ________.

  1. A) operation plans
  2. B) PERT reports
  3. C) resource plans
  4. D) critical paths
  5. E) production forecasts

 

63) ________ is a tool used by manufacturing facilities to coordinate production of all the goods the company makes.

  1. A) JIT system
  2. B) Value web
  3. C) Six Sigma
  4. D) Inventory list
  5. E) Master production schedule

 

64) ________ is a special type of bar chart that shows the progress of all the tasks needed to complete a project.

  1. A) Forecast schedule
  2. B) Gantt chart
  3. C) Value chart
  4. D) PERT diagram
  5. E) Supply chain diagram

 

65) The sequence of activities that take the longest time from start to finish in a PERT diagram is called the ________ path.

  1. A) external
  2. B) lagging
  3. C) minor
  4. D) critical
  5. E) buffered

 

66) ________ refers to the efficiency with which an organization can convert inputs to outputs.

  1. A) Productivity
  2. B) Sustainability
  3. C) Security
  4. D) Capacity
  5. E) System value

 

 

67) Polar Refrigerator Company reduces its inventory carrying costs by having their vendors deliver materials right before they are needed in the production process. This is an example of ________ inventory management.

  1. A) discounted
  2. B) PERT
  3. C) JIT
  4. D) buffered
  5. E) economic order based

 

68) Which of the following is the main purpose of just-in-time systems?

  1. A) disintermediation of distribution
  2. B) bettering work scheduling
  3. C) strategic analysis
  4. D) capacity improvement
  5. E) better inventory management

 

 

69) ________ refers to the creation of a unique good or service for each customer.

  1. A) Mass production
  2. B) Batch production
  3. C) Customized production
  4. D) Mass customization
  5. E) Standard production

 

 

70) Jass Glass Studio has been hired to make a church window. A church hires the company to make ten windows based on a design provided by the Church. This is an example of ________.

  1. A) mass production
  2. B) batch production
  3. C) customized production
  4. D) mass customization
  5. E) standard production

 

71) ________ refers to the creation of identical goods or services in large quantities.

  1. A) Mass customization
  2. B) Batch-of-one production
  3. C) Mass production
  4. D) Customized production
  5. E) Mass personalization

 

 

72) Morkel Toys is a manufacturer of toys. The company produces tens of thousands of Barbie Dolls in its factories everyday. It uses large machinery to automate the production and the output is standardized. This is an example of ________.

  1. A) mass customization
  2. B) batch-of-one production
  3. C) mass production
  4. D) customized production
  5. E) mass personalization

 

73) The manufacturing approach in which part of the product is mass produced and the remaining features are customized is known as ________.

  1. A) batch-of-one production
  2. B) mass production
  3. C) customized production
  4. D) mass manufacturing
  5. E) mass customization

 

74) Dell Computers allows customers to place orders online. The company produces major parts using bulk production and allows customers to personalize such features as software, color, memory size, and screen size. This type of manufacturing is an example of ________.

  1. A) mass customization
  2. B) mass production
  3. C) customized production
  4. D) mass manufacturing
  5. E) batch-of-one production

 

75) Most services are consumed at the same time they are produced and cannot exist before or after that time. This means that most services are ________.

  1. A) separable
  2. B) scalable
  3. C) perishable
  4. D) measurable
  5. E) standardized

 

 

 

76) ________ is the potential to increase production by expanding or replicating its initial production capacity.

  1. A) Perishability
  2. B) separability
  3. C) Serviceability
  4. D) Scalability
  5. E) Capacity

 

77) ________ refers to the degree to which a product or process meets reasonable or agreed-upon expectations.

  1. A) Quality
  2. B) Standard
  3. C) Scalability
  4. D) Capacity
  5. E) Serviceability

 

 

78) ________ refers to measuring quality against established standards after the good or service has been produced and weeding out any defective products.

  1. A) Statistical process control
  2. B) Quality assurance
  3. C) Quality control
  4. D) Continuous quality
  5. E) Total quality management

 

79) Which of the following is a key difference between quality control and quality assurance?

  1. A) High level managers perform quality control whereas middle managers perform quality assurance.
  2. B) Quality assurance is more proactive than quality control.
  3. C) Quality assurance is a subset of quality control process.
  4. D) Quality control is continuous, whereas quality assurance is intermittent.
  5. E) Quality control is typically preferred by organizations that focus on quality.

 

80) ________ is a comprehensive approach of companywide policies, practices, and procedures to ensure that every product meets quality standards.

  1. A) Statistical process control
  2. B) Quality assurance
  3. C) Quality control
  4. D) Quality directive
  5. E) Corrective management

 

81) ________ refers to the use of random sampling and tools, such as control charts, to monitor the production process.

  1. A) Total Quality Management
  2. B) Six Sigma
  3. C) ISO 9000
  4. D) JIT quality
  5. E) Statistical process control

 

82) Kaizen refers to ________.

  1. A) customization of production processes
  2. B) continuous quality improvements
  3. C) intensification of quality control
  4. D) use of statistical process control
  5. E) standardization of production processes

 

83) ________ is a rigorous quality management program that strives to eliminate deviations between the actual and desired performance of a business system and reduce defects to 3.4 per 1 million opportunities.

  1. A) Statistical process control
  2. B) Six Sigma
  3. C) ISO 9000
  4. D) ISO 9001
  5. E) Total quality management

 

 

84) ________ is a globally recognized family of standards for quality management systems.

  1. A) Statistical process control
  2. B) Six Sigma
  3. C) Kaizen
  4. D) ISO 9000
  5. E) Total quality management

 

 

85) Achieving ISO certification indicates that the ________.

  1. A) company has recently effected a drastic quality change
  2. B) company is responsive toward its environment
  3. C) company manufactures goods in a European country
  4. D) company’s internal processes meet accepted standards
  5. E) company ensures that the defects are limited to 3.4 in million

 

86) Explain how systems are found in a company.

 

 

87) Select a company of your choice and create a systems model for the company. Create the model by identifying various systems and by representing the company itself as a large system that receives inputs and provides outputs. Clearly mention the transformation processes in your model.

 

88) Choose a company of your choice and clearly depict the company’s value chain. Mention the actual transformation process in the value chain that you have created.

 

89) Explain the concept of value webs.

 

90) Why is the offshoring debate an excellent example of conflicting priorities in the stakeholder model?

 

91) One way for a country to protect its domestic industries is by levying tariffs against imported goods. The tariff makes the imported goods more expensive. It has been suggested that the U.S. establish a tariff against imported labor as well. A company that offshores jobs in pursuit of lower labor costs would have to pay a tariff or tax that would make that labor more expensive, and this action may discourage further offshoring. Do you think this tax or tariff would be a good idea? Why or why not? Do you think it would serve its intended purpose of slowing down offshoring?

 

92) Explain the various ways in which an SCM can have a profound strategic impact on companies and the broader economy.

 

93) Explain the significance of procurement in a business.

 

94) Compare and contrast MRP systems and ERP systems.

 

95) What is production and operations management?

 

96) Create a sample capacity plan for a business that you want to start. Clearly mention such aspects as future demand and starting capacity.

 

97) Describe lean systems and just-in-time (JIT) inventory systems.

 

98) Compare and contrast mass production, customized production, and mass customization.

 

99) Compare and contrast the production of goods and services.

 

100) Compare and contrast quality control and quality assurance.

 

 

 

Chapter 10   Employee Motivation

 

Business in Action, 6e (Bovee/Thill)

Chapter 10   Employee Motivation

 

1) Engagement predicts the likelihood that employees will stay or leave their jobs.

 

 

2) The four indicators, engagement, satisfaction, commitment, and rootedness can identify who is motivated and who isn’t, as well as explain why.

 

 

3) The fundamental motivational need called the “drive to defend” can be both positive and negative.

 

 

4) The Hawthorne studies were simpler and less influential than suggested by the Hawthorne effect.

 

5) Frederick W. Taylor’s scientific management approach focused on intrinsic motivational elements, such as opportunities for personal satisfaction.

 

6) According to Maslow, higher level needs can serve as motivators even if lower level needs are not yet met.

 

 

7) At the top of Maslow’s hierarchy is self-actualization need.

 

 

8) Theory X-oriented managers believe that most employees are motivated by intrinsic rewards.

 

9) Theory Y-oriented managers believe that employees like to work.

 

 

10) Unlike with the other classical theories, there is a lot of research to validate Herzberg’s two-factor theory.

 

11) Expectancy theory refers to the idea that employees base their level of satisfaction on the ratio of their inputs to the job and the outputs or rewards they receive from it.

 

 

12) The idea that your job satisfaction is based on how much you put into your job versus how much you get out of your job is the basis of the equity theory of motivation.

 

13) Complaints about gender pay fairness, where men get more money than women for the same work, are instances of equity issues.

 

 

14) Goals that are specific enough to give employees clarity and focus can function as effective motivators.

 

15) For goals to function as a motivator, the employee must believe in his or her ability to meet that goal.

 

 

16) Management by objectives is a motivational approach where managers set specific goals for each employee.

 

17) Task identity refers to the employee’s perception of how his or her job impacts the lives of other employees.

 

 

18) Job enrichment expands a job horizontally.

 

 

19) Cross-training involves expanding the scope of an individual job.

 

20) Using reinforcement theory, managers try to systematically encourage those actions considered beneficial to the company.

 

21) Negative reinforcement and punishment are the same thing.

 

 

22) Negative reinforcement encourages a particular behavior to be repeated through the reduction, removal, or absence of an unpleasant outcome.

 

23) Reinforcement needs to involve explicit monetary incentives to distort behavior.

 

 

24) Motivation is a deeply personal phenomenon.

 

25) Micromanagement refers to overseeing every small detail of employees’ work and refusing to give them freedom or autonomy.

 

 

26) ________ refers to the combination of forces that moves individuals to take certain actions and avoid other actions.

  1. A) Engagement
  2. B) Reinforcement
  3. C) Aptitude
  4. D) Motivation
  5. E) Ethics

 

 

27) An employee’s rational and emotional commitment to his or her work is termed as ________.

  1. A) engagement
  2. B) motivation
  3. C) work satisfaction
  4. D) drive
  5. E) competence

 

28) Which of the following refers to the degree to which an employee intends to stay with his or her employer?

  1. A) drive
  2. B) satisfaction
  3. C) rootedness
  4. D) engagement
  5. E) commitment

 

 

29) In the workplace, motivation can be assessed by measuring four indicators: satisfaction, engagement, rootedness, and ________.

  1. A) intelligence
  2. B) commitment
  3. C) creativity
  4. D) work performance
  5. E) cognitive dissonance

 

30) Which of the following is true about Frederick W. Taylor’s scientific management approach?

  1. A) It consists of a model in which a person’s needs are arranged in a hierarchy, with the most basic needs at the bottom and the more advanced needs toward the top.
  2. B) It refers to the managerial assumption that employees are irresponsible, unambitious, and dislike work and that managers must use force, control, or threats to motivate them.
  3. C) It is an approach that divides motivational forces into satisfiers and dissatisfiers.
  4. D) It highlighted subjective motivational elements, such as opportunities for personal satisfaction.
  5. E) It involved analyzing work and business processes in order to improve employees’ efficiency.

 

31) ________ refers to a supposed effect of organizational research, in which employees change their behavior because they are being studied and given special treatment.

  1. A) Herzberg’s two-factor theory
  2. B) Maslow’s hierarchy
  3. C) Theory X
  4. D) Hawthorne effect
  5. E) Theory Y

 

32) Andy works as a junior accountant in a firm. He has a nice house, a good insurance plan, a secure job, an affectionate family, and a close circle of friends. However, he is always sidelined at work, and his contributions and initiatives go unrecognized. His suggestions to improve the work environment are also overlooked. He feels that his superiors at his firm do not respect him. He begins to feel unsatisfied and his productivity reduces. Andy’s manager uses Maslow’s hierarchy, and identifies that Andy is on ________ needs level.

  1. A) physiological
  2. B) safety
  3. C) esteem
  4. D) self-actualization
  5. E) social

 

33) Workplace factors such as health insurance, pension plans, and retirement benefits would satisfy which of the following needs in Maslow’s hierarchy?

  1. A) safety needs
  2. B) social needs
  3. C) esteem needs
  4. D) physiological needs
  5. E) self-actualization needs

 

34) According to Maslow’s hierarchy of needs theory, which of the following are self-actualization needs?

  1. A) A person’s need to give and receive love and to feel a sense of belonging.
  2. B) A person’s need for a sense of self-worth, status, and attention.
  3. C) A person’s need to become what he or she is capable of becoming.
  4. D) A person’s needs for security and protection from physical and emotional harm.
  5. E) A person’s needs for food, clothing, and shelter.

 

35) Cheryl R. Lucas works as a food technologist at Maxiserve Inc., a leading food and nutrition company. She has a good salary, pension plan, high job security, and many friends at work. She has won “employee of the year” award twice, and her co-workers respect her. Cheryl has an inner drive to achieve her full potential, and feels that her work is worthwhile and satisfying in itself. Cheryl’s manager uses Maslow’s hierarchy to identify the need level she is at. He is most likely to classify her as being at the ________ need level.

  1. A) physiological
  2. B) safety
  3. C) esteem
  4. D) self-actualization
  5. E) social

 

36) According to McGregor, Theory X-oriented managers believe that ________.

  1. A) employees dislike work and can be motivated only by the fear of losing their jobs or by extrinsic rewards
  2. B) employees can be motivated by working for goals that promote creativity
  3. C) physiological needs must be satisfied before an employee can consider higher-level needs
  4. D) employees work not just because they want to make money or impress others, but because they feel their work is worthwhile and satisfying in itself
  5. E) they need to remove dissatisfying elements and add satisfying elements – doing one or the other is not enough

 

37) Elaine DeWitte, project head in a firm, framed management policies which followed McGregor’s Theory X style of thinking. Which of the following actions is she most likely to have implemented?

  1. A) Elaine closely tracks the daily performance of her employees and asks them to work according to a pre-determined schedule to prevent them from slacking.
  2. B) Elaine asks employees to volunteer for additional tasks assuming that all employees are motivated to accept responsibility.
  3. C) Elaine allows her employees to work from home as she believes that they would exercise self-direction.
  4. D) Elaine arranges skill-based training for her employees during the weekends, believing that all employees enjoy their work and are ambitious.
  5. E) Elaine motivates employees through intrinsic rewards, such as the freedom to choose how to accomplish their work, and involves them in decision-making processes.

 

38) At Creative Solutions, an event management firm, employees are given ample creative freedom, flexible work-timings, and they can choose their own working styles. The top management of the firm believes that all employees enjoy meaningful work, and are naturally committed to the firm’s goals. Team leaders are advised not to use force, control, or threats to motivate team members. The top management of Creative Solutions is most likely to be using which of the following approaches?

  1. A) Theory X
  2. B) Hawthorne’s effect
  3. C) Scientific management
  4. D) Expectancy theory
  5. E) Theory Y

 

39) ________ proposed a model that divides motivational forces into satisfiers (“motivators”) and dissatisfiers (“hygiene factors”).

  1. A) Douglas McGregor
  2. B) Abraham Maslow
  3. C) David McClelland
  4. D) Frederick W. Taylor
  5. E) Frederick Herzberg

 

40) According to Frederick Herzberg’s two-factor theory, which of the following factors acts as a motivator?

  1. A) favorable working conditions
  2. B) favorable company policies
  3. C) increase in pay
  4. D) job security
  5. E) responsibility

 

41) Kelly, who had recently joined an organization, participates in all corporate events as she wants to be accepted as a friend by her co-workers. According to David McClelland’s three-needs theory, this desire is known as ________.

  1. A) need for power
  2. B) need for achievement
  3. C) need for self-esteem
  4. D) need for affiliation
  5. E) need for security

 

42) In Herzberg’s two-factor theory, hygiene factors are ________.

  1. A) associated with dissatisfying experiences
  2. B) mostly intrinsic and include achievement, recognition, responsibility, and other personally rewarding factors
  3. C) the requirements for basic survival such as food, clothing, and shelter
  4. D) related to the need to give and receive love and to feel a sense of belonging
  5. E) related to the need for a sense of self-worth and integrity

 

 

43) Which of the following theorists developed the three-needs theory of motivation that highlights needs for power, affiliation, and achievement?

  1. A) Douglas McGregor
  2. B) Abraham Maslow
  3. C) David McClelland
  4. D) Frederick W. Taylor
  5. E) Frederick Herzberg

 

44) Justin M. Brown, the operations manager at Vernon Manufacturing Company, formulated a strategy to motivate the firm’s employees. Justin addressed employee’s dissatisfaction by increasing their salary and incentives; he employed several industrial counsellors to help employees deal with work-related stress, and improved the health insurance plan provided to employees. He also motivated employees by providing greater opportunity for advancement; recognizing employees who perform well; and giving employees greater responsibility to foster a sense of achievement in them. Justin’s measures are based on which of the following approaches?

  1. A) McClelland’s three needs theory
  2. B) Theory X
  3. C) Theory Y
  4. D) Herzberg’s two-factor theory
  5. E) scientific management

 

 

45) Which of the following is a drawback of David McClelland’s three-needs theory?

  1. A) it explains motivation in limited contexts
  2. B) it has limited practicality in terms of identifying needs
  3. C) it is criticized because of the methodology used in the original research
  4. D) subsequent research was unable to validate the model
  5. E) it is illogical

 

46) ________ connects an employee’s efforts to the outcome he or she thinks will result from those efforts.

  1. A) Maslow’s hierarchy
  2. B) Herzberg’s two-factor theory
  3. C) David McClelland’s three needs theory
  4. D) Expectancy theory
  5. E) Equity theory

 

 

47) Which of the following statements is true about expectancy theory?

  1. A) Expectancy theory focuses more on the specific forces that motivate employees and less on the process they follow to seek satisfaction in their jobs.
  2. B) Expectancy theory suggests that employee satisfaction depends on the perceived ratio of inputs to outputs.
  3. C) Research into expectancy theory has led to thinking about the broader concept of organizational justice, or perceptions of fairness in the workplace.
  4. D) Expectancy theory identifies four primary drives that underlie all motivation.
  5. E) Expectancy theory states that the effort employees will put forth depends on their beliefs regarding the rewards that the organization will give in response to that performance.

 

48) Belief in your ability to complete a task is known as ________.

  1. A) drive
  2. B) self-efficacy
  3. C) self-actualization
  4. D) rootedness
  5. E) self-motivation

 

49) ________ suggests that employee satisfaction depends on the perceived ratio of inputs to outputs.

  1. A) Maslow’s hierarchy
  2. B) Herzberg’s two-factor theory
  3. C) David McClelland’s three needs theory
  4. D) Expectancy theory
  5. E) Equity theory

 

 

50) Research into equity theory has led to thinking about the broader concept of ________.

  1. A) scientific management
  2. B) self-actualization
  3. C) organizational justice
  4. D) intrinsic rewards
  5. E) self-efficacy

 

51) ________ refers to the idea that carefully designed performance targets and aims can motivate employees to higher performance.

  1. A) Goal-setting theory
  2. B) Equity theory
  3. C) Herzberg’s two-factor theory
  4. D) David McClelland’s three needs theory
  5. E) Expectancy theory

 

52) Goal-setting theory of motivation suggests that ________.

  1. A) setting goals is unrelated to motivation in most employees
  2. B) setting goals is an effective way to motivate employees
  3. C) managers, not employees, need to set goals
  4. D) collaborative goal setting can undermine managerial authority
  5. E) employees should set their own goals without input from managers

 

53) ________ refers to a motivational approach in which managers and employees work together to structure personal goals and objectives for every individual, department, and project to mesh with the organization’s goals.

  1. A) Scientific management
  2. B) Theory X-oriented management
  3. C) Management by objectives
  4. D) Theory Y-oriented management
  5. E) Micromanagement

 

 

54) Which of the following statements is true about management by objectives?

  1. A) It suggests that employee satisfaction depends on the perceived ratio of inputs to outputs.
  2. B) It has not been validated by experimental research.
  3. C) It reduces employee involvement in goal setting and decision making.
  4. D) It reduces employee stress by removing specific goals and targets.
  5. E) It ensures that employee’s activities are directly linked to achieving the organization’s long-term goals.

 

55) Nelly Kaszton is the manager of a team of financial analysts at M&A Analytics, a Chicago-based firm which offers software, advisory services, and research facilities for financial risk management. The firm uses management by objectives technique to motivate employees to higher performance. As a part of the management by objectives (MBO) technique, Nelly Kaszton is most likely to implement which of the following actions?

  1. A) Nelly discourages people she supervises from focusing on goals, as she believes that it will lead to unhealthy competition.
  2. B) Nelly creates an action plan aimed at achieving department, and project-related goals, while ignoring the personal goals and objectives of the people she supervises.
  3. C) Nelly focuses on the individual needs and goals of the people she supervises, while ignoring the departmental and project-related objectives.
  4. D) Nelly collaborates with the people she supervises to set specific individual goals that mesh with the larger goals of M&A Analytics.
  5. E) Nelly gives employees full freedom to set their own goal, without supervision, as MBO techniques state that employees are naturally committed to certain goals.

 

 

56) Which of the following is a limitation of the goal-setting theory?

  1. A) decreased extrinsic motivation
  2. B) reduced internal competition
  3. C) missed learning opportunities
  4. D) less challenging goals
  5. E) reduced emphasis on short-term performance

 

57) ________ refers to a model suggesting that five core job dimensions influence three critical psychological states that determine motivation, performance, and other outcomes.

  1. A) Job characteristics model
  2. B) Management by objectives
  3. C) Goal-setting theory
  4. D) Theory X
  5. E) Theory Y

 

 

58) According to the job characteristics model, the degree to which the employee has responsibility for completing an entire task is called ________.

  1. A) task significance
  2. B) skill variety
  3. C) autonomy
  4. D) task availability
  5. E) task identity

 

59) According to the job characteristics model, ________ refers to the range of abilities and talents needed to accomplish the responsibilities associated with the job.

  1. A) task significance
  2. B) skill variety
  3. C) autonomy
  4. D) task availability
  5. E) task identity

 

60) According to the job characteristics model, the employee’s perception of the impact the job has on the lives of other people is called ________.

  1. A) skill variety
  2. B) task identity
  3. C) task significance
  4. D) autonomy
  5. E) emotional labor

 

61) According to the job characteristics model, experienced meaningfulness of the work is ________.

  1. A) a measure of how much employees care about the jobs they are doing
  2. B) the sense each employee has that his or her efforts contribute to the outcome
  3. C) an employees’ intention to stay in the company
  4. D) an employees’ support of the company and its mission
  5. E) employees’ awareness of the real-life results of their efforts

 

62) According to the the job characteristics model, experienced responsibility for results refers to ________.

  1. A) how much employees care about the jobs they are doing
  2. B) the sense each employee has that his or her efforts contribute to the outcome
  3. C) an employees’ intention to stay in the company
  4. D) an employees’ support of the company and its mission
  5. E) employees’ awareness of the real-life results of their efforts

 

63) Jason is an assembly-line worker at Mellick Manufacturers. He feels dissatisfied and frustrated with his job, which consists of tightening three bolts on each washing machine as it passes by him on the assembly line. At Mellick Manufacturers, assembly-line workers are closely supervised, and their incentives are linked to quantitative measures of productivity. According to the job characteristics model, which of the following is true about Jason’s job?

  1. A) It has high task significance.
  2. B) It has low task identity.
  3. C) It has high autonomy.
  4. D) It has low skill variety.
  5. E) It has low feedback.

 

 

64) Nathan works as an adolescent and family counselor in a private school. He feels motivated to come to work everyday because he is acutely aware of the impact he has on his clients. Being able to assist young people and their families through difficult situations gives him a profound sense of satisfaction. According to the job characteristics model, which of the following best describes Nathan’s job?

  1. A) It involves high extrinsic motivation.
  2. B) It has high task significance.
  3. C) It has low task identity.
  4. D) It has low autonomy.
  5. E) It requires low feedback.

 

65) Which of the following statements is true regarding the job characteristics model?

  1. A) According to the job characteristics model, the narrower the range of skills required, the more meaningful the work is likely to be to the employee.
  2. B) According to the job characteristics model, lower task identity contributes to the sense of meaning in work.
  3. C) According to the job characteristics model, autonomy is one of the three critical psychological states that determine motivation, performance, and other outcomes.
  4. D) According to the job characteristics model, employees with little growth needs respond most dramatically to improvements in job dimensions.
  5. E) According to the job characteristics model, experienced meaningfulness of the work is a measure of how much employees care about the jobs they are doing.

 

 

66) Making jobs more challenging and interesting by expanding the range of skills required is called ________.

  1. A) job enlargement
  2. B) cross-training
  3. C) job enrichment
  4. D) flextime
  5. E) task identity

 

67) ________ refers to training workers to perform multiple jobs and rotating them through these various jobs to combat boredom or burnout.

  1. A) Job enrichment
  2. B) Behavior modification
  3. C) Cross-training
  4. D) Job enlargement
  5. E) Task significance

 

 

68) Which of the following statements is true about job enlargement?

  1. A) It is best described as vertically expanding jobs.
  2. B) It involves training workers to perform multiple jobs.
  3. C) It makes jobs more interesting by expanding the range of skills required.
  4. D) It involves adding tasks that aren’t necessarily more challenging.
  5. E) It is a measure of how much employees care about the jobs they are doing.

 

69) Donald is the customer service manager at Artemis Technologies, a software development firm. During a lean period, employees who handle customer issues over the telephone are trained and asked to handle walk-in customers for 2 months; similarly, employees who handle walk-in customers are trained and asked to handle customer issues over the telephone for 2 months. Donald makes these changes to improve employee motivation. In this example, Donald is most likely to be using which of the following strategies?

  1. A) centralization
  2. B) cross-training
  3. C) decentralization
  4. D) horizontal integration
  5. E) benchmarking

 

 

70) Carrey works as a bank teller who handles deposits and disbursement. In an attempt to improve her motivation, Carrie’s manager asks her to distribute traveler’s checks and sell certificates of deposit as well. Though the additional tasks are not more challenging than what Carrey has been doing, they give her more to do. This is an example of ________.

  1. A) job rotation
  2. B) cross-training
  3. C) job enlargement
  4. D) benchmarking
  5. E) centralization

 

 

71) Luke is the store manager at the departmental store of Nature’s Basket, a multinational retailer corporation, located in Cincinnati. He decides to use cross-training to improve motivation levels amongst people who work at the store. Luke is most likely to implement which of the following measures?

  1. A) Luke asks people who stock the shelves to handle the cash registers, and the cashiers are taught to stock shelves.
  2. B) Luke provides detailed feedback to all employees at the store and sets performance goals for them.
  3. C) Luke starts a “Retail Apprenticeship Scheme” that allows employees to get certified and learn new skills.
  4. D) Luke hires temporary workers to assist store employees during peak periods.
  5. E) Luke implements an incentive scheme based on the individual performance of employees.

 

 

72) Allan Donegan is the creative director of Barton Advertising, an advertising company based in Dallas. He notices that Barry, the team-lead of the graphic designers has been demotivated and distracted for the past couple of months. In an attempt to motivate Barry, Allen decides to uses job enrichment strategy. Which of the following actions is Allen most likely to implement?

  1. A) Allen trains Barry to lead the team of copywriters and asks the team-lead of the copywriters to handle the graphic designers.
  2. B) Allen asks Barry to begin handling some of the client meetings and presentations that were earlier done by Allen.
  3. C) Allen asks Barry to handle some of the basic, uninteresting graphic designing tasks, to help his team meet tight deadlines.
  4. D) Allen begins to closely supervise Barry’s work and even sits in during Barry’s monthly meetings with his team members.
  5. E) Allen increases Barry’s salary and improves his incentive scheme.

 

73) Alex has been working as technical service representative for Convergence Technologies, a software development firm for two years. His duties and responsibilities include providing technical assistance to end users and preparing reports on product problems encountered. During a performance review meeting with his manager, Alex mentions that he finds his job to be very monotonous. Alex’s manager makes his job more challenging and interesting by asking him to conduct technical interviews of potential employees, as well as train and mentor new hires. In this example, Alex’s manager uses which of the following strategies to motivate him?

  1. A) benchmarking
  2. B) centralization
  3. C) decentralization
  4. D) job enrichment
  5. E) cross-training

 

 

74) ________ theory suggests that managers can motivate employees by shaping their actions through behavior modification.

  1. A) Expectancy
  2. B) Two-factor
  3. C) Equity
  4. D) Reinforcement
  5. E) Maslow’s

 

75) If an employee has perfect attendance for the month, he or she is given a $25 bonus. This would be an example of _______.

  1. A) an incentive
  2. B) job enrichment
  3. C) an intrinsic reward
  4. D) punishment
  5. E) negative reinforcement

 

 

76) Employees who receive positive reinforcement for one type of behavior are motivated to perform well in other areas as well. This process is known as ________.

  1. A) cross-training
  2. B) job enrichment
  3. C) benchmarking
  4. D) chaining
  5. E) horizontal integration

 

77) Encouraging the repetition of a particular behavior by not offering unpleasant consequences for the behavior is called ________.

  1. A) negative reinforcement
  2. B) cognitive restructuring
  3. C) transactional analysis
  4. D) positive reinforcement
  5. E) cross-training

 

78) John stayed late in order to finish up a project. When his manager found the completed project on her desk, she immediately sent John an email praising his good work and thanking him for going the extra mile. In this example, John’s manager uses ________.

  1. A) chaining
  2. B) transactional analysis
  3. C) cognitive restructuring
  4. D) negative reinforcement
  5. E) positive reinforcement

 

79) Which of the following statements is true regarding reinforcement theory?

  1. A) Both positive and negative reinforcement encourage behaviors to be repeated.
  2. B) Negative reinforcement is the opposite of positive reinforcement.
  3. C) Positive reinforcement cannot encourage undesirable behaviors.
  4. D) Reinforcement has to involve explicit monetary incentives to distort behavior.
  5. E) Punishment encourages the repetition of a particular behavior by not offering unpleasant consequences for the behavior.

 

 

80) Dick works as the first-line manager of a team of sales persons at Dowson’s Store, a leading clothes retail store. To motivate the sales agents in his team, Dick says that he will not assign weekend work and overtime to the top three sales agents, as per quantitative performance measures. In this example, Dick uses ________.

  1. A) positive reinforcement
  2. B) cognitive heuristic
  3. C) negative reinforcement
  4. D) decentralization
  5. E) onboarding

 

81) Reinforcement theory suggests that managers can motivate employees by shaping their actions through ________.

  1. A) carefully designed goals
  2. B) cross-training
  3. C) management by objectives
  4. D) behavior modification
  5. E) intrinsic motivation

 

82) A manager demotes an employee who does not meet performance goals. This is an example of ________.

  1. A) chaining
  2. B) negative reinforcement
  3. C) punishment
  4. D) mentoring
  5. E) scaffolding

 

83) Which of the following statements is true regarding motivational strategies?

  1. A) Managers should use micromanaging to motivate employees.
  2. B) Managers should avoid personalizing motivational efforts.
  3. C) Managers must address workplace problems and conflicts slowly.
  4. D) Managers need to adapt motivational tactics to circumstances and special needs.
  5. E) Managers should avoid letting employees choose which opportunities and rewards they want to pursue, as employees may not be capable of making the correct decisions.

 

 

84) The tendency for a manager to oversee every detail of their employees’ work and give them little autonomy in how to perform their jobs is known as ________.

  1. A) vertical integration
  2. B) micromanaging
  3. C) empowering
  4. D) centralization
  5. E) reinforcement

 

85) Charles is the owner and manager of Fresh Bakes, a bakery and cafe in New York. Charles keeps a close tab on all the employees at the store, and closely reviews their work. All the chefs have to get his approval before choosing the daily specials. Charles often gets irritated if any decision is made without his input. He even supervises the simple tasks such as store decorations, and the arrangement of the window display. In this example, Charles is most likely to be using which of the following strategies?

  1. A) vertical integration
  2. B) micromanaging
  3. C) empowering
  4. D) macromanaging
  5. E) reinforcing

 

 

86) Discuss the four indicators that can be used to measure motivation in a workplace setting?

 

87) Compare and contrast scientific management with Hawthorne effect.

 

88) Discuss Maslow’s hierarchy of needs.

 

89) Compare and contrast Theory X with Theory Y.

 

90) What is Herzberg’s two-factor theory? How do hygiene factors differ from motivators.

 

91) Discuss McClelland’s three-needs theory. How does the three-needs theory differ from other classical theories?

 

92) Compare and contrast expectancy theory with equity theory.

 

93) Discuss the criteria that must be met for goals to function as effective motivators.

 

94) Discuss the risks and limitations of the goal-setting theory.

 

95) Compare and contrast management by objectives with the job characteristics model.

 

96) Compare and contrast the three critical psychological states described in the job characteristics model.

 

97) Compare and contrast job enrichment with job enlargement.

 

98) Compare and contrast positive reinforcement with negative reinforcement.

 

99) What is the difference between negative reinforcement and punishment?

 

100) List the managerial strategies that are vital to maintaining a motivated workforce.

 

 

Chapter 11   Human Resources Management

 

Business in Action, 6e (Bovee/Thill)

Chapter 11   Human Resources Management

 

1) Work-life balance is the concept that employees need to juggle the competing demands of their professional and personal lives.

 

 

 

2) Job description refers to a statement describing the kind of person who would be best for a given job.

 

 

3) Turnover rate refers to the percentage of the workforce that is hired every year.

 

 

 

4) An employee who works from home and uses electronic communications to stay in touch with colleagues is said to be telecommuting.

 

5) Flextime allows two employees to share a single full-time job and split the salary and benefits.

 

6) In U.S. culture, elderly is often associated with strength, energy, possibilities, and freedom.

 

 

7) Baby Boomers, the youngest generation currently in the workforce, is noted for its entrepreneurial instincts and technological savvy.

 

 

8) Sexism refers to discrimination on the basis of gender.

 

 

9) The ethnic composition of the United States has been on a long-term trend of decreasing diversity.

 

10) Creation of a sexist environment in which employees are made to feel uncomfortable by lewd jokes, remarks, or gestures is a form of sexual harassment.

 

11) Headhunters refer to outside agencies that specialize in finding and placing employees.

 

 

12) Layoffs involve terminating employees because of poor performance or other disciplinary reasons.

 

 

13) Outplacement services refers to external professionals who help an organization in terminating employees.

 

14) The Age Discrimination in Employment Act outlaws mandatory retirement based on age alone.

 

15) The worst possible outcome in an annual review is a negative surprise.

 

16) The 360-degree review can uncover weaknesses that employees and even their direct managers might not be aware of.

 

 

17) Effective orientation programs help employees become more productive in less time, help eliminate confusion and mistakes, and can significantly increase employee retention rates.

 

18) Salary is paid by the unit of time or by the unit of output.

 

 

19) Wage employees are exempt from the Fair Labor Standards Act.

 

 

20) In contrast to commissions, bonus is a form of compensation that pays employees in sales positions based on the level of sales they make within a given time frame.

 

21) Gain sharing ties rewards to employees’ knowledge and abilities rather than to their job per se.

 

22) Pay for performance requires employees to accept a lower base pay but rewards them with bonuses, commissions, or stock options if they reach agreed-upon goals.

 

 

23) In 2010, the Patient Protection and Affordable Care Act (PPACA) was signed into law, featuring a variety of changes designed to improve access to health care.

 

 

24) A 401(k) plan refers to a defined-benefit plan in which companies specify how much they will pay employees upon retirement.

 

25) The Family Medical Leave Act (FMLA) of 1993 requires employers with 50 or more workers to provide up to 12 weeks of unpaid leave per year for childbirth, adoption, or the care of oneself, a child, a spouse, or a parent with serious illness.

 

26) Due to understaffing in his department, Matthew has been working 60-hour weeks for the last few months and is both physically and emotionally exhausted. Matthew is experiencing ________.

  1. A) employee burnout
  2. B) worker buyout
  3. C) discrimination
  4. D) work-life balance
  5. E) ergonomic stress

 

 

27) ________ refers to a state of physical and emotional exhaustion that can result from constant exposure to stress over a long period of time.

  1. A) Worker buyout
  2. B) Discrimination
  3. C) Employee burnout
  4. D) Work-life balance
  5. E) Ergonomic stress

 

28) M&Z Information Systems, a software development company, has built a day care center in the office premises to help working women take care of their children. The company also has flexible working hours, and work-from-home policies to enable employees to better manage both their personal and professional tasks. In this example, the company’s efforts are aimed at ________.

  1. A) aligning the workforce
  2. B) improving motivation through job enrichment
  3. C) succession planning
  4. D) improving employee’s work-life balance
  5. E) cross-training employees

 

 

29) Aligning the workforce refers to ________.

  1. A) making jobs more challenging and interesting by expanding the range of skills required
  2. B) helping employees balance the competing demands of their personal and professional lives
  3. C) improving overall work environment
  4. D) training workers to perform multiple jobs
  5. E) matching the right employees to the right jobs at the right time

 

30) An overall environment that results from job and work conditions is called ________.

  1. A) ergonomics
  2. B) work-life balance
  3. C) quality of work life
  4. D) job enrichment
  5. E) employee turnover

 

31) ________ is the process of gathering information about the demands, responsibilities and worker requirements of each position in the organization.

  1. A) Employee orientation
  2. B) Performance monitoring
  3. C) Compensation analysis
  4. D) Competency analysis
  5. E) Job analysis

 

 

32) ________ refers to a statement of the tasks involved in a given job and the conditions under which the holder of a job will work.

  1. A) Job specification
  2. B) Job description
  3. C) Succession planning
  4. D) Job analysis
  5. E) Job enrichment

 

33) ________ refers to a statement describing the kind of person who would be best for a given job – including the skills, education, and previous experience that the job requires.

  1. A) Job specification
  2. B) Job enrichment
  3. C) Succession planning
  4. D) Job analysis
  5. E) Job description

 

34) ________ refers to the percentage of the workforce that leaves every year.

  1. A) Cyclical unemployment
  2. B) Attrition rate
  3. C) Employee alignment
  4. D) Employee retention
  5. E) Employee turnover

 

 

35) Manthis Manufacturing is losing approximately 19% of its workforce each year. This shows that it has high ________.

  1. A) performance monitoring
  2. B) employee alignment
  3. C) turnover rate
  4. D) employee retention
  5. E) job security

 

36) Megan is an HR representative at Canales Investment firm. The firm needs to recruit new sales representatives, as the firm plans to expand its business. Megan is asked to review the job responsibilities of the current sales representatives, and makes a list of the key tasks and responsibilities associated with the position. She is also asked to create an optimal employee profile to fill the sales representative position. The task assigned to Megan can be classified under which of the following processes?

  1. A) job analysis
  2. B) job enrichment
  3. C) forced ranking
  4. D) onboarding
  5. E) job expansion

 

37) Linda W. Taylor is the recruitment manager at Creative Solutions, a brand management firm. The creative director of the firm recently quits, and Linda needs to find a replacement for the position. She conducts a job analysis to identify the nature and demands associated with the position of the creative director, as well as the skills required to fill the position. Based on this research, she creates a summary stating the tasks the creative director is responsible for, the working hours, and the working conditions. Linda posts this document in key job portals to inform potential applicants what to expect from the job. This document is an example of a ________.

  1. A) statement-of-purpose
  2. B) business proposal
  3. C) contract of employment
  4. D) job description
  5. E) code of ethics

 

38) ________ identifies key employees who are considered critical to the company’s ongoing operations and lists potential replacements.

  1. A) Replacement chart
  2. B) Job specification
  3. C) Pareto chart
  4. D) Depth chart
  5. E) Job analysis

 

39) Workforce planning efforts that identify possible replacements for specific employees, usually senior executives, is called ________.

  1. A) job specification
  2. B) employee retention
  3. C) 360-degree review
  4. D) succession planning
  5. E) job enrichment

 

40) The human resource department at Wagner Group, a financial services firm, identified a list of key executives who were critical to the functioning of the firm. The HR department then worked with these executives to identify potential middle-level managers who would go through a mentoring and leadership development program. These middle-level managers were to act as potential replacements if the firm lost any of its key executives. In this example, the Wagner Group uses which of the following strategies?

  1. A) job specification
  2. B) decentralization
  3. C) 360-degree review
  4. D) succession planning
  5. E) vertical integration

 

41) Pearl Architectural Design, an architecture firm in Vermont, hired several junior-level architects on a temporary basis to fill the workforce requirement for a specific project. In this example, Pearl Architectural Design uses ________ employees.

  1. A) unskilled
  2. B) contingent
  3. C) full-time
  4. D) permanent
  5. E) existing

 

42) Employee retention programs ________.

  1. A) aim to increase the turnover rate
  2. B) list potential replacements for key positions in a firm
  3. C) evaluate job requirements and create job specifications
  4. D) aim to hire more contingent employees
  5. E) ensure a steady supply of experienced employees for new opportunities

 

43) WNIC, a publishing firm, allows its employees to choose their own work hours as long as they work for 8 hours everyday. This is an example of ________.

  1. A) job sharing
  2. B) succession planning
  3. C) telecommuting
  4. D) flextime
  5. E) diversity initiatives

 

44) Janet teaches the first grade at Meadows Elementary on Monday, Wednesday and Friday. Jeff teaches the class on Tuesday and Thursday. They split the salary and benefits of the job on a pro-rata basis. In this example, the human resource team at Meadows Elementary uses which of the following alternative work arrangements?

  1. A) job sharing
  2. B) cross-training
  3. C) flextime
  4. D) performance monitoring
  5. E) succession planning

 

 

45) Michelle works as a nurse at Queens Diagnostic and Treatment Center, in New York. She wants to leave the hospital for two years to work with “Doctors Without Borders,” a volunteer organization that provides urgent medical care to victims of war and disaster. The human resource manager at the hospital is reluctant to lose a good employee, and considers using alternative work arrangements to meet her needs. Which of the following initiatives is he most likely to take to address this particular situation?

  1. A) decentralization
  2. B) benchmarking
  3. C) flexible career paths
  4. D) job rotation
  5. E) job enrichment

 

46) John did not promote Cynthia because he thought that a woman could not supervise male construction crews in his company. Given that Cynthia had the necessary experience and credentials, John may have been guilty of ________.

  1. A) narcissism
  2. B) collective bargaining
  3. C) nepotism
  4. D) sexism
  5. E) ethnocentrism

 

 

47) ________ made it illegal for employers to practice sexism or discrimination on the basis of gender.

  1. A) The Equal Pay Act of 1963
  2. B) The Civil Rights Act of 1964
  3. C) The Wagner Act
  4. D) The Social Security Act
  5. E) The Fair Labor Standards Act

 

48) Irene has been working as the senior manager at Ashton Industries for the past four years. Though she has high performance levels, she finds it difficult to move to a top executive position because of subtle discrimination, such as lack of mentoring, limited access to informal networks of communication, and biased rating and testing systems. She is often assigned to projects where there is very limited scope for career growth. In this example, Irene faces ________.

  1. A) nepotism
  2. B) ethnocentrism
  3. C) narcissism
  4. D) affirmative action
  5. E) the glass ceiling

 

49) Discriminatory practices that have prevented women and minorities from advancing to executive level jobs are referred to as ________.

  1. A) nepotism
  2. B) the glass ceiling
  3. C) ethnocentrism
  4. D) narcissism
  5. E) affirmative action

 

50) Which of the following initiatives is most likely to be taken by a firm that aims to help employees with disabilities perform activities that might otherwise be difficult or impossible for them?

  1. A) informally promoting glass ceiling
  2. B) using job enrichment
  3. C) investing in assistive technologies
  4. D) using succession planning
  5. E) promoting ethnocentrism

 

51) IBM established executive-led task forces to represent women, Asian Americans, African Americans, Hispanic Americans, Native Americans, people with disabilities, and individuals who are gay, lesbian, bisexual, and transgender. This is an example of ________.

  1. A) diversity initiatives
  2. B) horizontal integration
  3. C) ethnocentric policies
  4. D) decentralization
  5. E) deregulation

 

52) K.M. Retailers, an international consumer products retail chain, gives preference to women and minority owned suppliers and sub-contractors. The firm hires a large number of employees from ethnic minorities, and the human resource department keeps the interests of these groups in mind while framing company policies. In this example, K.M. Retailers uses which of the following strategies?

  1. A) job enrichment
  2. B) ethnocentric policies
  3. C) decentralization
  4. D) deregulation
  5. E) diversity initiatives

 

 

53) The process of attracting appropriate applicants for an organization’s jobs is known as ________.

  1. A) de-layering
  2. B) recruiting
  3. C) positioning
  4. D) downsizing
  5. E) onboarding

 

54) Quality of hire measures ________.

  1. A) the amount of money spent in hiring and training new employees
  2. B) the level of productivity of employees in the probationary period
  3. C) how closely incoming employees meet the company’s needs
  4. D) the percentage of minority groups in a firm’s workforce
  5. E) the percentage of the workforce that leaves every year

 

55) Which of the following acts prohibits any form or testing that can be construed as a preemployment medical examination?

  1. A) the Taft-Hartley Act
  2. B) the Landrum-Griffin Act
  3. C) the Wagner Act
  4. D) Americans with Disabilities Act
  5. E) Fair Labor Standards Act

 

56) Harmony House, a software development firm, had recently hired a large number of software developers to work on several new projects. Colleen, the manager of the human resource department, wanted to assess the effectiveness of the recruitment team. She used a combination of criteria including the percentage of qualifications met, and subjective assessment by managers to measure how closely newly-hired employees met the company’s needs. Colleen is most likely to be using which of the following tools?

  1. A) quality of hire
  2. B) employee satisfaction
  3. C) utilization percent
  4. D) job enrichment
  5. E) outplacement

 

 

57) ________ is a euphemism used to suggest that an organization is making changes in the workforce to match its business needs more precisely.

  1. A) Restructuring
  2. B) Repositioning
  3. C) Nearshoring
  4. D) Work sharing
  5. E) Rightsizing

 

58) Which of the following statements is true about terminating employees?

  1. A) Employers have legal rights to fire employees for whistle-blowing.
  2. B) The Age Discrimination in Employment Act requires dismissal of an employee who reaches a certain age.
  3. C) Worker buyouts are usually undertaken to stop employees from voluntarily departing.
  4. D) Rightsizing usually involves downsizing the workforce.
  5. E) Layoffs refer to firing employees because of violation of company policies.

 

 

59) ________ services, such as resume-writing courses, career counseling, and secretarial assistance are offered to laid-off employees by many companies.

  1. A) Rightsizing
  2. B) Termination
  3. C) Coaching
  4. D) Affirmative action
  5. E) Outplacement

 

60) Arc Techsystems Inc., a global technology services and outsourcing company, was forced to layoff several employees due to a business slow-down. To help laid-off employees re-orientate to the job market, the company provided them résumé-writing courses, career counseling, office space, and secretarial help. In this example, Arc Techsystems Inc. provides which of the following services to the laid-off employees?

  1. A) rightsizing
  2. B) outplacement
  3. C) coaching
  4. D) affirmative action
  5. E) diversity initiatives

 

61) The ________ provides retirement, disability and medical coverage for employees and their dependents and is jointly funded by employers and employees.

  1. A) Fair Labor Standards Act
  2. B) Civil Rights Act
  3. C) Employee Retirement Income Security Act
  4. D) Social Security Act
  5. E) Lilly Ledbetter Fair Pay Act

 

62) Which of the following is true about the Landrum-Griffin Act?

  1. A) It requires employers to fund programs that provide income for qualified unemployed persons.
  2. B) It requires employers to let employees or their beneficiaries buy continued health insurance coverage after employment ends.
  3. C) It establishes the right of employees to form, join, and assist unions and the right to strike.
  4. D) It combats financial fraud within unions.
  5. E) It governs the establishment and operation of private pension programs.

 

 

63) Which of the following is true about the Wagner Act?

  1. A) It prohibits employers from interfering in union activities.
  2. B) It gives the president the authority to impose injunctions against strikes.
  3. C) It gives individual employees the right to choose not to join a union.
  4. D) It prohibits employers from hiring illegal immigrants.
  5. E) It sets strict guidelines for child labor.

 

64) ________ refers to distributions of financial incentives to employees who voluntarily depart; usually undertaken in order to reduce the payroll.

  1. A) Mandatory retirement
  2. B) Affirmative action
  3. C) Worker buyout
  4. D) Decentralization
  5. E) Outplacement

 

65) ________ refers to a multidimensional review in which a person is given feedback from subordinates, peers, superiors, and possibly outside stakeholders such as customers and business partners.

  1. A) Skills inventory
  2. B) Coaching
  3. C) 360-degree review
  4. D) Behaviorally anchored rating scale
  5. E) Benchmarking

 

66) James C. Massey is the team-lead of a team of twelve associate consultants and two senior associate consultants at AMZ Inc., a global management consulting firm. James’s performance appraisal requires a web-based feedback form to be filled by his manager, the members of his team, as well as several other team-leaders he has worked with. The HR department consolidates data obtained from these forms and provides James with detailed feedback regarding his performance during the past year. In this example, which of the following performance appraisal methods is used?

  1. A) 360-degree review
  2. B) behaviorally anchored rating scale
  3. C) benchmarking
  4. D) skills inventory
  5. E) coaching

 

67) A(n) ________ identifies both the current skill levels of the company’s workforce as well as those the company needs in order to succeed.

  1. A) employee turnover analysis
  2. B) replacement chart
  3. C) EPM
  4. D) skills inventory
  5. E) 360-degree review

 

68) Salary differs from wages in that the salary ________.

  1. A) falls under the purview of the Fair Labor Standards Act
  2. B) does not fall under the purview of the Fair Labor Standards Act
  3. C) is based on a fixed amount per year
  4. D) relates to exempt employees
  5. E) is paid by the unit of time

 

69) A wage differs from salary in that the wage ________.

  1. A) is based on a fixed amount per year
  2. B) falls under the purview of the Fair Labor Standards Act
  3. C) is paid by the unit of time
  4. D) does not fall under the purview of the Fair Labor Standards Act
  5. E) relates to nonexempt employees

 

70) Which of the following statements is true about administering employee compensation?

  1. A) Fixed cash compensation for work, independent of the number of hours worked, is termed as wages.
  2. B) Cash payment based on an employee’s unit of output is called salary.
  3. C) Labor-Management Relations Act sets specific guidelines that employers must follow when administering salaries and wages.
  4. D) Compensation comprises of direct payments such as wages or salary, and excludes indirect payments through employee benefits.
  5. E) Compensation is dictated by prevailing conditions in the job market and the value each employee brings to the organization.

 

71) Melissa is a pharmaceutical sales representative and her compensation includes a percentage of her sales each quarter. This type of pay is called ________.

  1. A) sliding-scale plan
  2. B) cafeteria plan
  3. C) knowledge-based pay
  4. D) salary
  5. E) commission

 

72) ________ refers to tying rewards to profits or cost savings achieved by meeting specific goals.

  1. A) Gain sharing
  2. B) Employee benefits
  3. C) Wellness program
  4. D) Sliding-scale plan
  5. E) Cafeteria plan

 

73) ________ refers to an incentive program that rewards employees for meeting specific, individual goals.

  1. A) Pay for performance
  2. B) Knowledge-based pay
  3. C) Salary
  4. D) Competency-based pay
  5. E) Commission

 

74) ________ refers to pay tied to an employee’s acquisition of skills.

  1. A) Cafeteria plan
  2. B) Knowledge-based pay
  3. C) Sliding-scale plan
  4. D) Gain sharing
  5. E) Commission

 

 

75) Kyle Creative Solutions, an advertising firm based in Lakeland, Florida, achieves cost-cutting goals through significant reduction in use of resources, better time-management, and increased productivity. The top managers of the firm decide to reward the employees of the firm, for their contribution towards the company’s goals, by distributing a portion of the savings amongst the employees. In this example, Kyle Creative Solutions uses which of the following incentive programs?

  1. A) commission
  2. B) cafeteria plan
  3. C) gain sharing
  4. D) sliding-scale plans
  5. E) wellness programs

 

 

76) Employee benefits refer to ________.

  1. A) pay tied to an employee’s acquisition of knowledge or skills
  2. B) tying rewards to profits or cost savings achieved by meeting specific goals
  3. C) compensation other than wages, salaries, and incentive programs
  4. D) employee compensation based on a percentage of sales made
  5. E) a cash payment, in addition to regular wage or salary, that serves as a reward for achievement

 

77) ________ refers to flexible benefit programs that let employees personalize their benefits packages.

  1. A) Cafeteria plans
  2. B) Gain sharing
  3. C) Profit sharing
  4. D) Commissions
  5. E) Bonus

 

 

78) Massay Manufacturers, a toy manufacturing company, provides free consultation with a professional dietitian who comes to the office premises every friday. The HR department also encourages employees with low immunity to avail the gym facilities provided by the firm. Massay Manufacturers uses which of the following tools to tackle the high health-care costs?

  1. A) sliding-scale plans
  2. B) health insurance buying groups
  3. C) wellness programs
  4. D) health savings accounts
  5. E) high-deductible insurance

 

79) Greytip Information Systems, a software development firm, tackles high health-care costs by encouraging employees to enroll in smoking-cessation classes, and teaches them relaxation techniques to help them to deal with stress. Greytip Information Systems is most likely to be using which of the following cost-cutting tools?

  1. A) sliding-scale plans
  2. B) health insurance buying groups
  3. C) wellness programs
  4. D) 401(k) plan
  5. E) high-deductible insurance

 

 

80) With a(n) ________, employers charge for health insurance based on salary, making insurance more affordable for lower-wage workers.

  1. A) sliding-scale plan
  2. B) wellness plan
  3. C) employee stock-ownership plan
  4. D) 401(k)
  5. E) pension plan

 

81) ________ is a defined contribution retirement plan in which employers often match the amount employees invest.

  1. A) Self-insurance
  2. B) In-house clinic
  3. C) Sliding-scale plan
  4. D) Wellness program
  5. E) 401(k) plan

 

82) Which of the following enables employees to become partial owners of a company?

  1. A) a self-insurance plan
  2. B) a cafeteria plan
  3. C) an employee stock-ownership plan
  4. D) a sliding-scale plan
  5. E) a wellness plan

 

 

83) Stock options grant employees the right to purchase a set number of shares of the employer’s stock at a specific price, called the ________.

  1. A) 401(k) plan
  2. B) sliding-scale plan
  3. C) convenience yield
  4. D) exercise price
  5. E) market price

 

84) ________ refers to a company-sponsored counseling or referral plan for employees with personal problems.

  1. A) Health savings accounts
  2. B) Employee assistance program
  3. C) High-deductible insurance
  4. D) Sliding-scale plans
  5. E) 401(k) plan

 

85) Karen works at Pinnacle Industries, a manufacturer of snowmobiles, ATVs, and neighborhood electric vehicles based in Minnesota. She was a victim of domestic violence, and suffered from severe depression. The firm offered her company-sponsored private psychotherapy sessions with a certified therapist. In this example, Pinnacle Industries offers Karen which of the following employee benefit plans?

  1. A) 401(k) plan
  2. B) sliding-scale plans
  3. C) employee assistance program
  4. D) health savings accounts
  5. E) health insurance buying groups

 

86) Discuss some of the contemporary staffing challenges.

 

 

87) Compare and contrast job description with job specification.

 

88) List the factors HR managers weigh to forecast demand for the numbers and types of employees who will be needed at various times in the firm.

 

89) What are the alternative work arrangements that a company can use to better accommodate the needs of employees?

 

90) Compare and contrast the workforce implications of the Baby Boomers generation with those of the Generation X.

 

91) Compare and contrast the terms race and ethnicity.

 

92) What are diversity initiatives?

 

93) When can an employee file a wrongful discharge lawsuit against the employer?

 

94) Compare and contrast layoffs with worker buyouts.

 

95) What is performance appraisal? Compare and contrast the 360-degree review method with electronic performance monitoring (EPM).

 

96) Discuss the processes involved in training and developing employees.

 

97) Compare and contrast wage and salary?

 

98) Compare and contrast commissions with bonus.

 

99) Compare and contrast retirement plans with pension plans.

 

100) What is a 401(k) plan? How does it differ from an employee stock-ownership plan?

 

 

Chapter 12   Labor Relations

 

Business in Action, 6e (Bovee/Thill)

Chapter 12   Labor Relations

 

1) Labor unions are organizations that represent employees in negotiations with management.

 

 

2) Nonunion employees typically receive greater benefits than union members.

 

 

 

3) Seniority refers to the length of time someone has worked for his or her current employer.

 

 

4) Work rules specify such things as the tasks certain employees are required to do or are forbidden to do.

 

5) National Labor Relations Act is a legislation established to restrict labor unions.

 

6) Norris-La Guardia Act of 1932 allows companies freedom to obtain injunctions against union strikes.

 

 

7) Labor-Management Reporting and Disclosure Act is designed to ensure democratic processes and financial accountability within unions.

 

 

8) A union insists that the organization must hire workers only if they are union members. This union is implementing a union shop.

 

9) In an agency shop, employees aren’t required to join the union but must pay the equivalent of union dues.

 

10) Right-to-work laws promote the implementation of union shops to promote union security.

 

 

11) Craft unions offer membership to all workers who are involved in the manufacturing process of a product.

 

 

12) The United Brotherhood of Carpenters and Joiners of America give membership to carpenters and joiners who work in the United States. This is an example of an industrial union.

 

13) A national union is composed of many local unions that represent employees in specific locations.

 

14) Authorization cards are cards signed by employees to indicate interest in having a union represent them.

 

 

15) Union members take a decertification vote to increase the scope of a union’s objectives.

 

 

16) Collective bargaining is a negotiation between union and management negotiators to forge the human resources policies that will apply to all employees covered by a contract.

 

17) A solution obtained through mediation is legally binding.

 

18) Arbitration is a process in which an impartial referee listens to both sides and then makes a judgment by accepting one side’s view.

 

 

19) Boycott is a temporary work stoppage aimed at forcing management to accept union demands.

 

 

20) An injunction is an order issued by a union to stop work temporarily.

 

21) Strikebreakers are nonunion workers hired to do the jobs of striking workers.

 

 

22) Unfair labor practices refers to unlawful acts made by either unions or management.

 

23) Grievance is an informal complaint made to the immediate supervisor.

 

 

24) Progressive discipline usually starts with a written warning or a suspension without pay.

 

25) Employee Free Choice Act will make it easier for unions to organize groups of workers.

 

 

26) Typically, labor unions seek to protect employee interests by ________.

  1. A) negotiating with employers for better wages and benefits
  2. B) funding skill-improvement programs for employees
  3. C) indirectly working to improve working conditions
  4. D) providing annual bonuses and benefits to employees
  5. E) indirectly involving in salary negotiations with the employer

 

27) Which of the following is an advantage of labor unions?

  1. A) Labor unions do not involve in direct negotiations with the management.
  2. B) Most unions do not collect money from the members.
  3. C) Most unions are not related to political activities.
  4. D) Labor unions promote skill-based pay systems and promotions.
  5. E) Union members receive greater benefits compared to nonunion employees.

 

28) Seniority refers to the ________.

  1. A) length of time someone has worked for his or her current employer
  2. B) skills that an employee has acquired over a period of time
  3. C) present productivity level of an employee
  4. D) lifetime productivity value of an employee
  5. E) total compensation and benefits offered to an employee

 

 

29) Labor unions ________.

  1. A) form contracts to spell out formal procedures for disciplining
  2. B) will lead to lower employee compensation levels
  3. C) give more importance to skills than seniority
  4. D) are fully sponsored by the employers
  5. E) cause a significant improvement in organizational productivity

 

30) Which of the following is a disadvantage of becoming a union member?

  1. A) Unions give little importance to the length of time someone has worked.
  2. B) Unions do not promote formal procedures for disciplining employees.
  3. C) Unions often force employees to help fund political activities.
  4. D) Unions do not have any impact in determining the work rules.
  5. E) Unions do not provide tangible and measurable benefits to employees.

 

 

31) ________ are a common element of labor contracts and specify such things as the tasks certain employees are required to do or are forbidden to do.

  1. A) Compensation definition
  2. B) Work rules
  3. C) Authorization cards
  4. D) Employee certificates
  5. E) Productivity certificates

 

 

32) ________ is a legislation passed in 1935 that established labor relations policies and procedures for most sectors of private industry.

  1. A) Labor-Management Relations Act
  2. B) National Labor Relations Act
  3. C) Norris-La Guardia Act
  4. D) Landrum-Griffin Act
  5. E) Labor-Management Reporting Act

 

33) ________ Act was formed in 1932 to limit companies’ ability to obtain injunctions against union strikes, picketing, membership drives, and other activities.

  1. A) Labor-Management Reporting
  2. B) Landrum-Griffin
  3. C) National Labor Relations
  4. D) Norris-La Guardia
  5. E) Labor-Management Relations

 

 

34) The Wagner Act ________.

  1. A) allowed employers to limit the employees’ rights to organize
  2. B) required employers to bargain in good faith with unions
  3. C) led to a major fall in union membership in the United States
  4. D) was widely welcomed by employers and employees alike
  5. E) did not have a significant impact on the balance of power in U.S. industry

 

 

35) ________ is a legislation passed in 1947 that addressed many concerns raised by business owners and shifted the balance of power back to business owners.

  1. A) Labor-Management Reporting Act
  2. B) National Labor Relations Act
  3. C) Norris-La Guardia Act
  4. D) Landrum-Griffin Act
  5. E) Labor-Management Relations Act

 

36) The Labor-Management Relations Act ________.

  1. A) restricts employees’ freedom of speech and outlaws promotional activities of unionization
  2. B) guarantees the right of employees not to join or support unions
  3. C) allows unions to strike for creating new jobs for union workers
  4. D) gives employers the right to stop strikes and protests at the workplace
  5. E) restricts employers’ freedom of speech to dissuade workers from voting for unionization

 

 

37) ________ is a legislation passed in 1959 to ensure democratic processes and financial accountability within unions.

  1. A) National Labor Relations Act
  2. B) Norris-La Guardia Act
  3. C) Landrum-Griffith Act
  4. D) Wagner Act
  5. E) Labor-Management Relations Act

 

38) Albert’s union follows voice vote instead of the secret ballot method for elections. Albert feels that this leads to biased elections. Albert can sue the union to stop this practice by using the ________ Act.

  1. A) National Labor Relations
  2. B) Wagner
  3. C) Norris-La Guardia
  4. D) Labor-Management Relations
  5. E) Labor-Management Reporting and Disclosure

 

 

39) Union security refers to the measures that ________.

  1. A) protect a union’s right to represent workers
  2. B) provide democratic rights within unions
  3. C) protect employees’ freedom of speech
  4. D) disallow compulsory union membership
  5. E) protect businesses against strikes imposed by unions

 

40) Which of the following is a form of union security where an employer is allowed to hire only union members?

  1. A) closed shop
  2. B) union shop
  3. C) agency shop
  4. D) open shop
  5. E) voluntary shop

 

41) Caltrex Manufacturing is a firm that manufactures surgical equipment. The company is unionized and has only one union. The union insists that all the individuals should become a member of the union before being hired by the company. This is an example of a(n) ________.

  1. A) intermediate shop
  2. B) union shop
  3. C) agency shop
  4. D) open shop
  5. E) closed shop

 

42) In a(n) ________, employees don’t have to be members when they are hired, but they must join the union within a specified period of time.

  1. A) open shop
  2. B) union shop
  3. C) closed shop
  4. D) agency shop
  5. E) voluntary shop

 

43) Andrew joins a company as a production worker. The Human Resource department informs him that he has to be a part of the company’s labor union within six months in order to continue working in the company. Identify the union security measure that the company is following.

  1. A) agency shop
  2. B) open shop
  3. C) closed shop
  4. D) union shop
  5. E) voluntary shop

 

44) In a(n) ________, employees aren’t required to join the union but must pay the equivalent of union dues.

  1. A) closed shop
  2. B) open shop
  3. C) agency shop
  4. D) union shop
  5. E) permanent shop

 

 

45) Norman is working in a bottled water production unit. Norman’s company is unionized, but he has not joined the union. However, every year he pays an amount equivalent to the union’s annual fee. Norman’s company is using a(n) ________.

  1. A) permanent shop
  2. B) closed shop
  3. C) agency shop
  4. D) union shop
  5. E) open shop

 

46) Craft unions are unions that offer membership to workers ________.

  1. A) who are not directly employed
  2. B) with a specific skill
  3. C) of the same age
  4. D) with the same seniority
  5. E) with a part-time membership

 

 

47) Which of the following is an example of an industrial union?

  1. A) a union that provides membership only to those with a specific skill
  2. B) a union of electrical workers in the United States
  3. C) a union of engineers across the world
  4. D) a union that gives membership only to salespeople in an industry
  5. E) a union that represents all the employees of a manufacturing company

 

48) Local unions represent employees ________.

  1. A) who have membership in many industrial unions
  2. B) with a specific skill or ability
  3. C) who work in more than one country
  4. D) in a specific geographic area or facility
  5. E) who do not have a formal union membership

 

49) The members of local unions are informally known as the ________.

  1. A) internal-card
  2. B) advocate
  3. C) lobbyist
  4. D) activist
  5. E) rank-and-file

 

 

50) Employees in one of the plants of a leather manufacturing company form a labor union to represent all employees of the plant. The union does not give membership to employees of other plants and is not associated with any political party or other union. This union is an example of a ________ union.

  1. A) geographic
  2. B) local
  3. C) craft
  4. D) national
  5. E) skill-based

 

51) National unions ________.

  1. A) do not have the power to negotiate with individual companies
  2. B) are composed of many local unions
  3. C) are not bounded by geographical restrictions
  4. D) do not undertake their own membership activities
  5. E) are open to members who have a specific set of skills

 

52) Authorization cards are ________.

  1. A) cards signed by employees to indicate interest in having a union represent them
  2. B) cards issued by employers to distinguish the members of a union
  3. C) documents issued by unions to employees when awarding membership
  4. D) cards issued by employers to the employees who are not part of any union
  5. E) cards signed by employees to indicate that they have attended a union meeting

 

53) Alfa Electrical is a firm that manufactures electrical products. The employees believe that they are not being paid adequately and decide to form a union. More than seventy percent of the employees issue authorization cards for forming a union, but the management refuses to accept the union. In order to form a union in this company, the employees ________.

  1. A) must obtain support of all the employees in the organization
  2. B) should form an informal union and function for more than a year
  3. C) must obtain support of at least 75 percent of the employees
  4. D) should petition the NLRB to remove the management from authority
  5. E) should petition the NLRB to conduct a secret-ballot certification election

 

54) Which of the following statements is true of a certification election?

  1. A) Such elections are not bound by NLRB guidelines.
  2. B) It is usually carried out using a voice vote.
  3. C) It can be conducted only if at least 30 percent of the employees agree.
  4. D) It can be conducted only if the management gives approval.
  5. E) Employees sharing different working conditions are allowed to vote.

 

55) Identify the action that is typically taken after a company has recognized a union.

  1. A) union petition filing
  2. B) NLRB inspection
  3. C) collective bargaining
  4. D) certification election
  5. E) decertification election

 

 

56) The National Labor Relations Board (NLRB) certifies a union if ________.

  1. A) thirty percent of the employees favor certification
  2. B) a union wins certification election
  3. C) it receives a union petition from employees
  4. D) a union is conducting a decertification election
  5. E) it receives a request from 30 percent of the employees for a collective bargaining

 

57) If a union is certified, the employer is then required to negotiate with the union for at least a period of ________.

  1. A) six months
  2. B) five years
  3. C) one year
  4. D) three years
  5. E) three months

 

 

58) Union members take a decertification vote to ________.

  1. A) have membership in more than one union
  2. B) increase the scope of a union’s objectives
  3. C) demand a pay hike from the employer
  4. D) increase the strength of an industrial union
  5. E) take away a union’s right to represent them

 

 

59) Which of the following refers to a negotiation between union and management negotiators to forge the human resources policies that will apply to all employees covered by a contract?

  1. A) collective bargaining
  2. B) grievance procedure
  3. C) product negotiation
  4. D) progressive discipline
  5. E) grievance negotiation

 

60) A labor contract is ________.

  1. A) an agreement between employers for labor arrangements
  2. B) formed when negotiations are not initiated by unions
  3. C) a labor union contract for managerial staff
  4. D) often used as a synonym for collective bargaining
  5. E) a contract signed by employees who are not part of the union

 

61) Which of the following is a key difference between mediation and arbitration?

  1. A) Mediation involves a third party, whereas arbitration is performed without third parties.
  2. B) Arbitrators give suggestions, whereas mediators give directives.
  3. C) Mediation is compulsory, whereas an arbitration is voluntary in nature.
  4. D) Arbitration provides a legally binding settlement, whereas mediation is not binding.
  5. E) Mediation has a win-lose orientation, whereas arbitration has a win-win orientation.

 

 

62) In collective bargaining, a mediator is a(n) ________.

  1. A) committee comprising many employees
  2. B) impartial third party
  3. C) financial intermediary
  4. D) representative of the union
  5. E) representative of management

 

63) A new union is formed through a certification election in Alberco Manufacturing. The company and the union fail to reach an agreement in collective bargaining. Both parties appoint a panel of judges to intercede the discussions and agree that the decision of the panel will be binding. This solution is an example of ________.

  1. A) grievance procedure
  2. B) arbitration
  3. C) mediation
  4. D) injunction suit
  5. E) decertification

 

 

64) ________ is a temporary work stoppage aimed at forcing management to accept union demands.

  1. A) Arbitration
  2. B) Boycott
  3. C) Lockout
  4. D) Strike
  5. E) Injunction

 

65) Dorco Cycles is a leading manufacturer of sports bicycles. The company has not revised employee benefits for a long time now. The labor union representatives interacted with the management a number of times to increase the wages, but the company maintained that it is not in good shape to offer a pay hike. The union finally decides to stop work for a week to pressure management. This is an example of a(n) ________.

  1. A) arbitration
  2. B) strike
  3. C) boycott
  4. D) lockout
  5. E) injunction

 

 

66) ________ is a union weapon where union members and sympathizers refuse to buy or handle the product of a target company.

  1. A) Injunction
  2. B) Lockout
  3. C) Strike
  4. D) Boycott
  5. E) Arbitration

 

 

67) Corgo Inc. is a manufacturer of personal care products. It manufactures such products as cosmetics, soaps, and toothpastes. The company has more than 4000 workers. In order to pressure the company to give a pay hike, the labor union asks the employees to avoid buying the company’s products for their own families and relatives. This tactic is known as ________.

  1. A) injunction
  2. B) lockout
  3. C) strike
  4. D) boycott
  5. E) arbitration

 

 

68) Which of the following terms refers to a court order that requires one side in a dispute to refrain from or engage in a particular action?

  1. A) injunction
  2. B) boycott
  3. C) lockout
  4. D) arbitration
  5. E) infringement

 

69) Strikebreakers refers to ________.

  1. A) injunctions issued by the employer to break strikes
  2. B) nonunion workers hired during strikes
  3. C) lawsuits filed against striking employees
  4. D) lawsuits filed against striking unions
  5. E) striking employees who are not in favor of the strike

 

70) Robert Plantations has more than 500 employees. The employees announce a strike to pressure the management to provide a salary hike. However, the management is defiant and thinks that the salaries are adequate for the job that employees are doing. The management uses replacement workers to detriment the strike. In this case, the management is using ________ to put pressure on employees.

  1. A) strikebreakers
  2. B) publicity campaigns
  3. C) boycott
  4. D) lockout
  5. E) reverse strike

 

71) Which of the following terms refers to a formal complaint against an employer?

  1. A) arbitration
  2. B) boycott
  3. C) grievance
  4. D) mediation
  5. E) injunction

 

 

72) Arbex Manufacturing allows its employees to file formal complaints against the managers, managerial actions, and violations of agreements. Employees are required to fill out a form to file a complaint. Such complaints are called ________.

  1. A) collective bargains
  2. B) injunctions
  3. C) grievances
  4. D) arbitrations
  5. E) disciplining procedures

 

73) Which of the following statements is true of employee grievance?

  1. A) Labor unions cannot file grievances on employees’ behalf.
  2. B) Only profound complaints can be filed as grievances.
  3. C) Employee grievances are informal in nature.
  4. D) Grievance procedures are not followed by escalations.
  5. E) Most collective bargaining agreements specify procedures for filing grievances.

 

 

74) ________ is an escalating process of discipline that gives employees several opportunities to correct performance problems before being terminated.

  1. A) Collective bargaining
  2. B) Labor relation
  3. C) Progressive discipline
  4. D) Grievance procedure
  5. E) Total quality management

 

75) Lothex Manufacturing is a firm that produces automobile accessories such as seat belts, leather seats, and cushions. The company has a collective bargaining agreement with the labor union and the contract has specified steps for punishing employees. The firm has to give a warning to an employee for his or her first offence. The employer can issue a suspension if the employee commits the mistake again and the employee is terminated on committing the mistake for a third time. This is an example of ________.

  1. A) employee mediation
  2. B) progressive discipline
  3. C) labor arbitration
  4. D) grievance procedure
  5. E) total quality management

 

 

76) Progressive discipline usually starts with a(n) ________.

  1. A) suspension without pay
  2. B) oral warning
  3. C) written warning
  4. D) reduction in pay
  5. E) suspension with pay

 

77) One of the key differences between arbitration and the civil justice system is that in arbitration the ________.

  1. A) arbitration cannot be used for alternative dispute resolution
  2. B) employer gets preference over the employee union
  3. C) union and the employer get to select the arbitrator
  4. D) employee union gets preference over the employer
  5. E) decisions made through arbitration are not legally binding

 

 

78) Which of the following is a valid observation of arbitrators?

  1. A) Arbitrators usually represent the management rather than the union.
  2. B) Collective bargaining contracts must specify a permanent arbitrator.
  3. C) Most arbitrators are chosen on a case-by-case basis.
  4. D) Most decisions by arbitrators are not legally binding.
  5. E) Arbitrators usually represent the union rather than the management.

 

 

79) Labor unions place a high priority on ________.

  1. A) increasing organizational productivity
  2. B) engaging in disciplining procedures
  3. C) recruiting and retaining members
  4. D) keeping operational costs low
  5. E) attaining operational flexibility in the organization

 

80) Which of the following statements is true of the long-term trends observed in organized labor?

  1. A) Labor unions have become stronger in private sector than in public sector.
  2. B) Businesses have become tolerant to unionization in workplaces.
  3. C) The trend has been against unions in the private sector.
  4. D) Unions have been eradicated fully from the public sector.
  5. E) Labor unions have become stronger in both public and private sectors.

 

 

81) Which of the following legislations propose a card check-only certification option?

  1. A) Labor-Management Relations Act
  2. B) Employee Free Choice Act
  3. C) National Labor Relations Act
  4. D) Labor-Management Reporting Act
  5. E) Norris-La Guardia Act

 

82) Which of the following legislations has a requirement that new collective bargaining agreements be submitted to binding arbitration if agreement can’t be reached after specified periods of negotiation and mediation?

  1. A) Labor-Management Relations Act
  2. B) Norris-La Guardia Act
  3. C) National Labor Relations Act
  4. D) Employee Free Choice Act
  5. E) Labor-Management Reporting Act

 

83) Which of the following is a valid observation of the proposed Employee Free Choice Act?

  1. A) The Act is welcomed by both employee unions and business managements.
  2. B) The Act outlaws the use of arbitration in collective bargaining discussions.
  3. C) The Act was subject to huge opposition from labor unions across the U.S.
  4. D) The Act is proposed to outlaw the use of authorization cards for unionization.
  5. E) The act would significantly alter the union election provisions of the Wagner Act.

 

84) Which of the following is a major reason why the Congress has been unsuccessful in passing the Employee Free Choice Act?

  1. A) anti-constitutional provisions of the Act
  2. B) lack of necessary drafting policies
  3. C) opposition from the business lobby
  4. D) opposition from the labor unions
  5. E) lack of support from international employees

 

 

85) “Unions have a negative impact on productivity.” Do you agree with this statement? Explain your answer.

 

86) Explain the benefits of unionization.

 

87) Compare and contrast the Wagner act of 1935 and The Taft-Hartley Act of 1947.

 

88) Explain the importance of the Landrum-Griffith Act.

 

89) Compare and contrast craft unions and industrial unions.

 

 

90) Compare and contrast a closed shop with a union shop.

 

91) Explain the concept of national unions.

 

 

92) Most employees of a manufacturing firm want to form a labor union. However, the management is totally against the formation of a union and opposes it outright. Suggest a union organization for employees under this circumstance.

 

93) Form two student groups of five members each. Conduct a mock trial of a collective bargaining process using the groups with one group representing the management of an industry and another group representing the labor union.

ach group should have an agenda and discuss issues that are relevant for the groups that they are representing. Each group should try to achieve more than the other group. They should follow the following steps:

(1) Preparation (includes deciding the offer and preparing the demands)

(2) Actual meeting and discussion

(3) Reaching an agreement

(4) Voting and ratification

 

94) Consider an industry of your choice and compose and draft a collective bargaining agreement with a firm in the industry and the labor union in the company.

 

95) The management at RXF Constructions has failed to convince the employee union to accept an hourly wage of $10. The union is demanding a wage of $13 per hour. The management feels that such high wages will not be feasible. Conduct a mock trial of compulsory arbitration to resolve this issue.

 

96) Compare and contrast mediation and arbitration.

 

97) Explain how unions use publicity campaigns to pressure management.

 

98) What are unfair labor practices? Provide examples.

 

99) Do you think labor unions will survive in the long term? Frame arguments to support your claim.

 

100) Explain the major changes that will take place if Employee Free Choice Act is enacted.

 

 

 

Chapter 13   The Art and Science of Marketing

 

Business in Action, 6e (Bovee/Thill)

Chapter 13   The Art and Science of Marketing

 

1) A developing country markets itself as a good destination of foreign investment. This would be an example of place marketing.

 

 

 

2) Producers do not create needs, but they do try to shape your wants by exposing you to attractive choices.

 

 

3) When a supermarket provides fresh, ready-to-eat dishes as an alternative to buying all of the ingredients needed to make dinner, it is creating place utility.

 

 

4) The sales concept is an approach to business management that stresses customer needs and wants, seeks long-term profitability, and integrates marketing with other functional units within the organization.

 

5) Customer loyalty is one of the most significant goals of relationship marketing.

 

 

6) A central element in the marketing concept is involving the customer as a partner in a mutually beneficial relationship rather than treating the customer as a passive recipient of products and promotional messages.

 

 

7) Social commerce refers to a type of information system that captures, organizes, and capitalizes on all the interactions that a company has with its customers.

 

 

8) Google Analytics helps online advertisers measure the effectiveness of specific search-term keywords and track the behavior of website visitors.

 

9) Ethnographic research refers to research that measures brain activity while customers are viewing or interacting with product, Web site, or other elements.

 

10) The launch of a product under real-world conditions but on a limited scale (such as in a single city), is a form of neuromarketing studies.

 

 

11) Many Web sites use stealth marketing, letting visitors sign up for specific content streams with the promise that they won’t be bombarded with information they don’t care about.

 

12) The U.S. Federal Trade Commission (FTC) and the Word of Mouth Marketing Association assert that stealth marketing techniques are deceptive because they don’t give their targets the opportunity to raise their instinctive defenses against the persuasive powers of marketing messages.

 

 

13) Organizational market is made up of individuals and families who buy goods and services for personal or household use.

 

14) Consumers make all kinds of decisions that are hard to explain by any rational means.

 

 

15) At one time or another, all consumers suffer from cognitive dissonance.

 

16) Aspirational groups are those to which consumers actually belong, such as families, networks of friends, clubs, and work groups.

 

 

17) The purchasing behavior of organizations is easier to understand than the purchasing behavior of consumers because it’s more clearly driven by economics and influenced less by subconscious and emotional factors.

 

 

18) Close relationships between buyers and sellers are not common in organizational purchasing.

 

19) Strategic marketing planning refers to the process of examining an organization’s current marketing situation, assessing opportunities and setting objectives, and then developing a marketing strategy to reach those objectives.

 

 

20) Successful marketers try to identify sources of competitive advantage and areas that need improvement.

 

 

21) Market share can be defined by either number of units sold or by sales revenue.

 

 

22) Concentrated marketing is the narrowest strategy of all market-coverage strategies, in which firms target a single location or even a single customer.

 

23) Customer lifetime value refers to the total potential revenue from each customer over a certain time span minus the cost of attracting and keeping that customer.

 

24) A firm’s marketing mix consists of product, price, distribution, and customer communication.

 

 

25) The basic distinction between wholesalers and retailers is that retailers sell to other companies whereas wholesalers sell to individual consumers.

 

26) Differences between a person’s actual state and his or her ideal state is termed as ________.

  1. A) cognition
  2. B) utility
  3. C) needs
  4. D) perception
  5. E) drive

 

27) Wants differ from needs in that wants ________.

  1. A) are more specific
  2. B) are independent of culture
  3. C) create demand for products
  4. D) are the focus of marketing efforts
  5. E) are independent of a person’s experiences

 

 

 

28) The advertising campaign for Fort Wayne, Indiana, is based on the slogan “Room for Dreams.” The city uses this logo to attract businesses and visitors to the city; it also encourages Fort Wayne businesses to incorporate “Room for Dreams” into their marketing campaigns. This would be an example of ________ marketing.

  1. A) cause-related
  2. B) guerrilla
  3. C) place
  4. D) ambush
  5. E) stealth

 

29) ACZ Pharmaceuticals, an American multinational pharmaceutical corporation, conducts “HIV/AIDS Awareness” camps in various cities across the United States. The firm also uses this campaign to promote its latest range of drugs. In this example, ACZ Pharmaceuticals uses ________.

  1. A) place marketing
  2. B) social commerce
  3. C) stealth marketing
  4. D) cause-related marketing
  5. E) diversification

 

 

30) The exchange of value between parties is referred to as a(n) ________.

  1. A) emolument
  2. B) sale
  3. C) purchase
  4. D) transition
  5. E) transaction

 

31) When a manufacturer combines fabric, buttons, and zippers to create clothing, it creates ________.

  1. A) time utility
  2. B) form utility
  3. C) place utility
  4. D) value utility
  5. E) possession utility

 

32) ________ utility is the benefit provided by making the company’s products available where customers want to purchase them.

  1. A) Form
  2. B) Possession
  3. C) Value
  4. D) Place
  5. E) Time

 

33) Which of the following statements is true about the marketing concept?

  1. A) It views the customer only as a target to be sold to.
  2. B) It views the primary purpose of a business as making things.
  3. C) It believes in building short-term relationships with customers.
  4. D) It refers to the view that companies should respond to customers’ needs.
  5. E) It counts on customers to figure out which products they need and take the steps to find and purchase them.

 

34)  KLM Inc., a textile manufacturing firm, has been supplying mesh fabric to Clarence Furnitures for one year. KLM Inc. is delayed by two days in delivering a scheduled batch of mesh fabric to Clarence Furnitures. The firm had met all its previous supply dates, and adhered to all the required quality standards. KLM Inc. follows a relationship marketing strategy. In keeping with this strategy, KLM Inc. is most likely to ________.

  1. A) give Clarence Furnitures a 20% discount on the material supplied
  2. B) send an email to Clarence Furnitures informing them about the delay
  3. C) ask Clarence Furnitures for an extension on future supplies as well
  4. D) take disciplinary action against employees who were responsible for the delay
  5. E) make structural changes to enable the firm to detect and prevent such delays

 

35) ________ refers to the creation and sharing of product-related information among customers and potential customers.

  1. A) Guerrilla marketing
  2. B) Cause-related marketing
  3. C) Vertical integration
  4. D) Social commerce
  5. E) Diversification

 

36) Just Read, an online retailer of books, encourages users to write reviews of the books which they purchase and rate them. This allows potential customers to know more about the books offered for sale. In this example, Just Read uses which of the following strategies?

  1. A) diversification
  2. B) product development
  3. C) social commerce
  4. D) market segmentation
  5. E) vertical integration

 

37) Chicago Music Academy, a private music school, uses online advertisement as a large part of its advertising campaign. The firm uses Google Analytics to measure the effectiveness of specific search-term keywords and track the behavior of website visitors. The firm uses this information to focus on the most productive marketing efforts. In this example, Chicago Music Academy uses ________.

  1. A) stealth marketing
  2. B) product development
  3. C) marketing research
  4. D) market development
  5. E) diversification

 

38) The process of collecting, analyzing, and interpreting information about customers, competitors, and other related marketing issues is known as ________.

  1. A) social commerce
  2. B) product development
  3. C) market development
  4. D) data mining
  5. E) marketing research

 

39) Eight women, with children within the age range of 3 to 7 years, participated in a panel discussion conducted by the marketing department of Ecospace Beach Resorts, based in California. The facilitator asked the women what amenities they wanted in a resort when they go on a vacation. They were also asked to discuss which facilities made a resort more convenient for people with young children. In this example, Ecospace Beach Resorts uses which of the following methods?

  1. A) survey
  2. B) ethnographic research study
  3. C) focus group
  4. D) process data collection
  5. E) neuromarketing study

 

40) A research technique that measures the brain activity of customers while they are viewing or interacting with your company’s products or brands is known as ________.

  1. A) neuromarketing studies
  2. B) experiments
  3. C) psychoanalysis
  4. D) transactional analysis
  5. E) focus groups

 

41) Studying people in their daily lives to learn about their needs, wants, and behaviors in real-life settings is called ________.

  1. A) neuromarketing studies
  2. B) ethnographic research
  3. C) experiments
  4. D) focus groups
  5. E) process data collection

 

 

42) Unlike surveys, focus groups ________.

  1. A) require knowledge of statistical techniques
  2. B) are not designed to collect statistics that represent a larger group
  3. C) fail to uncover issues that might require further study
  4. D) are not used to probe deeper into issues
  5. E) study people in their daily lives to learn about their needs, wants, and behaviors in real-life settings

 

43) Bell & Rubio, a camera manufacturing company, hires actors in different cities to approach strangers and ask them to take their picture with a Bell & Rubio camera. The actors strike up conversations with people, tell them about the advantages of the camera, and encourage them to buy one for themselves without informing them that it’s an advertising campaign. In this example, Bell & Rubio uses which of the following strategies?

  1. A) social commerce
  2. B) data mining
  3. C) permission-based marketing
  4. D) stealth marketing
  5. E) projective techniques

 

 

44) An e-commerce website allows visitors to sign up for specific content streams with the promise that they won’t be bombarded with information they don’t care about. This is an example of ________.

  1. A) stealth marketing
  2. B) social commerce
  3. C) permission-based marketing
  4. D) market development
  5. E) cause-related marketing

 

45) Tension that exists when a person’s beliefs don’t match his or her behaviors is called ________.

  1. A) cognitive dissonance
  2. B) anchoring
  3. C) hindsight bias
  4. D) self-serving bias
  5. E) fundamental attribution error

 

 

46) Buyer’s remorse, in which one makes a purchase and then regrets doing so, is an example of ________.

  1. A) anchoring
  2. B) hindsight bias
  3. C) self-serving bias
  4. D) fundamental attribution error
  5. E) cognitive dissonance

 

 

47) Before you decide to purchase a new laptop, you ask some friends and coworkers which model they have purchased and how pleased they are with its performance. This influence factor is known as ________.

  1. A) socioeconomic level
  2. B) situational factors
  3. C) self-image
  4. D) culture
  5. E) reference groups

 

48) Consumer purchasing differs from organizational purchasing in that consumer purchasing ________.

  1. A) is influenced more by subconscious and emotional factors
  2. B) follows a formal buying process
  3. C) has greater complexity in product usage
  4. D) involves a closer relationships between buyers and sellers
  5. E) has a greater emphasis on economic payback

 

49) Which of the following statements is true about the consumer decision process?

  1. A) Behavioral economics suggests that consumer behavior follows a completely rational process.
  2. B) Cognitive dissonance refers to the delivery of marketing messages to people who are not aware that they are being marketed to.
  3. C) Companies, government agencies, and other organizations that buy goods and services are a part of the consumer market.
  4. D) Many consumers tend to believe that “you are what you buy,” so they make or avoid choices that support their desired self-images.
  5. E) Aspirational reference groups are those to which consumers actually belong, such as families, networks of friends, clubs, and work groups.

 

50) Organizational purchasing differs from consumer purchasing in that organizational purchasing ________.

  1. A) is influenced more by subconscious and emotional factors
  2. B) usually involves closer relationships between buyers and sellers
  3. C) has lower complexity in product usage
  4. D) lacks a formal buying process
  5. E) is less clearly driven by economics

 

 

51)  ________ refers to the increase in the value of a product with the number of customers who use it.

  1. A) Cognitive dissonance
  2. B) Possession utility
  3. C) Network effect
  4. D) Positioning
  5. E) Form utility

 

52) The process of examining an organization’s current marketing situation, assessing opportunities and setting objectives, and then developing a marketing strategy to reach those objectives is called ________.

  1. A) stealth marketing
  2. B) strategic marketing planning
  3. C) marketing research
  4. D) social commerce
  5. E) marketing concept

 

53) ________ involves selling more of your existing products into the markets you already serve.

  1. A) Product development
  2. B) Market development
  3. C) Diversification
  4. D) Market penetration
  5. E) Benchmarking

 

54) Creating new goods and services for a firm’s current markets is called ________.

  1. A) market penetration
  2. B) product development
  3. C) market development
  4. D) diversification
  5. E) pure play

 

 

55) Selling existing products to new markets is called ________.

  1. A) market development
  2. B) product development
  3. C) market segmentation
  4. D) market penetration
  5. E) vertical integration

 

56) Creating new products for new markets is called ________.

  1. A) market penetration
  2. B) vertical integration
  3. C) diversification
  4. D) horizontal integration
  5. E) decentralization

 

57) Yummy Times, a canned soup manufacturing firm, uses advertisements that highlight new ways in which their customers can use Yummy Times canned soups, such as in casseroles or as sauces. The firm aims to get its existing customers to buy more of its products. This strategy is known as ________.

  1. A) product development
  2. B) market development
  3. C) diversification
  4. D) benchmarking
  5. E) market penetration

 

 

58) Erikson Manufacturers, a firm that designs and manufactures fire, carbon monoxide, and heat detection and notification devices, has been selling its products to U.S. corporate firms for several years. After examining its current marketing condition, the firm decides to open sales offices in Italy and Germany to sell its existing products. The firm aims to gain market share in Europe. This strategy is known as ________.

  1. A) product development
  2. B) market segmentation
  3. C) market penetration
  4. D) market development
  5. E) vertical integration

 

59) Quick Bite is a hugely popular U.S. chain of drive-in fast food restaurants. After assessing the current marketing situation, the firm opens a coffeehouse in Japan. The coffeehouse has a classic style and relaxed atmosphere, which is completely different from the firm’s Quick Bite outlets. In this example, the firm uses which of the following marketing strategies?

  1. A) market penetration
  2. B) diversification
  3. C) vertical integration
  4. D) horizontal integration
  5. E) decentralization

 

 

60) Sterling Fashions, an apparel manufacturer, sells women’s clothes and fashion apparel in it’s stores across the U.S. and Canada. Following extensive market research, the firm decides to manufacture and sell women’s footwear and designer handbags in its existing markets. In this example, Sterling Fashions uses which of the following strategies?

  1. A) market penetration
  2. B) decentralization
  3. C) market development
  4. D) diversification
  5. E) product development

 

61) Market penetration differs from diversification in that market penetration ________.

  1. A) involves division of a diverse market into smaller, relatively homogeneous groups
  2. B) involves selling more of the existing products in current target markets
  3. C) involves selling new products in existing markets
  4. D) involves a higher amount of risk
  5. E) involves selling existing products to new markets

 

62) High Fashion, a firm that manufactures and sells ready-to-wear fashion apparel in Chicago, becomes a very popular brand within a few years of its launch. After examining the current market situation, Fernanda Rhone, the owner of the firm, decides to pursue market opportunities through market development. Which of the following actions is she most likely to take based on this decision?

  1. A) She offers discount coupons to her current market through a popular lifestyle magazine.
  2. B) She opens another store in Cincinnati, which stocks the same ready-to-wear fashion apparel that she sells in Chicago.
  3. C) She starts selling new home decor products such as quilts, wall hangings, and table cloths at her current fashion outlet in Chicago.
  4. D) She opens a new home furnishing outlet in Cincinnati, which sells home furnishings and home decor items at affordable prices.
  5. E) She changes the layout and decor of her current fashion outlet in Chicago, to make it more attractive and customer friendly.

 

63) Grouping customers with similar characteristics, behaviors, and needs is known as ________.

  1. A) a marketing mix
  2. B) market development
  3. C) social commerce
  4. D) market segmentation
  5. E) market penetration

 

64) Lifestyle Apparels Inc., an international fashion and apparel manufacturing and selling company, divides its target market segment into groups based on the climatic conditions of the locations where the customers reside. This enables the firm to offer products that are suited to the climatic conditions of the place where the customers reside. In this example, Lifestyle Apparels Inc. uses which of the following strategies?

  1. A) market development
  2. B) vertical integration
  3. C) market segmentation
  4. D) horizontal integration
  5. E) cause-related marketing

 

65) The study of the statistical characteristics of a population is called ________.

  1. A) demographics
  2. B) psychographics
  3. C) behavioral segmentation
  4. D) anthropology
  5. E) ethnographic research

 

 

66) ________ classifies people by focusing on why they behave the way they do by examining such issues as brand preferences, media preferences, values, attitudes, self-concept, and opinions.

  1. A) Social commerce
  2. B) Demographics
  3. C) Geographic segmentation
  4. D) Psychographics
  5. E) Market penetration

 

67) ________ refers to the categorization of customers according to their relationship with products or response to product characteristics.

  1. A) Demographic segmentation
  2. B) Geographic segmentation
  3. C) Ethnographic segmentation
  4. D) Psychographic segmentation
  5. E) Behavioral segmentation

 

68) Demographics differs from psychographics in that demographics ________.

  1. A) involves analyzing customers’ self-concept and behavior
  2. B) involves segmenting the market into geographic units
  3. C) involves grouping customers according to characteristics such as age, gender, and income
  4. D) involves grouping customers according to their relationship with products
  5. E) involves grouping customers according to their response to product characteristics

 

 

69) When you segment a market using demographics, you subdivide your customers according to characteristics such as their ________.

  1. A) attitudes
  2. B) lifestyles
  3. C) neighborhoods
  4. D) habits
  5. E) ethnic group

 

70) When you segment a market using psychographics, you subdivide your customers according to characteristics such as their ________.

  1. A) gender
  2. B) ethnic group
  3. C) self-concept
  4. D) counties
  5. E) occupation

 

 

71) Majestic Shoes Inc., an international shoes and footwear manufacturing firm, groups its customers according to the region in which they live. The firm markets its range of waterproof, cold-weather footwear in mountainous regions. In this example, Majestic Shoes Inc. uses which of the following targeting strategies?

  1. A) demographic segmentation
  2. B) psychographic segmentation
  3. C) horizontal integration
  4. D) cause-related marketing
  5. E) geographic segmentation

 

72) Which of the following can be cited as an example of geographic segmentation?

  1. A) Affinity Bank, an international bank, issues Golden Eagle cards by invitation only to customers who spend more than $250,000 a year on their Affinity credit cards.
  2. B) A luxury car company creates a hybrid line for consumers who are concerned about the environment.
  3. C) Harley-Davidson offers a wide variety of motorcycles, and each model attempts to cater to a particular lifestyle.
  4. D) P&G acquires the list of parents-to-be and showers them with samples of Pampers and other baby products to capture a share of their future purchases.
  5. E) A toy manufacturing company launches a special line of Hispanic books, dolls, puppets, and toys for areas with high Hispanic habitation.

 

 

73) Marks Inc., a company that manufactures carbonated soft drinks called Quick Drinks, classifies its target market based on the occasions that prompt customers to buy Quick Drinks, their frequency of purchasing the drinks, and their preference for the Quick Drinks brand. This data enables the firm to better market its products. In this example, Marks Inc. uses which of the following targeting strategies?

  1. A) geographic segmentation
  2. B) demographic segmentation
  3. C) behavioral segmentation
  4. D) horizontal integration
  5. E) cause-related marketing

 

74) A company ignores differences among buyers and offers only one product line and presents it with the same communication, pricing, and distribution strategies to all potential buyers. This company is most likely to be using which of the following targeting strategies?

  1. A) mass marketing
  2. B) cause-related marketing
  3. C) individualized marketing
  4. D) micromarketing
  5. E) differentiated marketing

 

 

75) Woodworks Inc., an American furniture manufacturing company, has stores across America that sell furniture. The firm offers the Fine Furnishings collection of residential furniture designed for the middle and upper middle income group segments. It offers a Platinum Collection of luxury furniture for high income groups. The firm also has a range of corporate office furniture that includes desks, chairs, filing cabinets, cubicles, and other office furniture. Woodworks Inc. uses which of the following targeting strategies?

  1. A) mass marketing
  2. B) differentiated marketing
  3. C) concentrated marketing
  4. D) individualized marketing
  5. E) niche marketing

 

76) Mass marketing differs from differentiated marketing in that mass marketing ________.

  1. A) has one marketing mix for the entire market
  2. B) focuses on only a single market segment
  3. C) requires substantial resources
  4. D) sells a variety of products to several target customer groups
  5. E) targets a single location or even a single customer

 

 

77) Concentrated marketing differs from micromarketing in that concentrated marketing ________.

  1. A) targets a single location or even a single customer
  2. B) focuses on only a single market segment
  3. C) ignores differences among buyers
  4. D) involves crafting entire marketing programs of products for an individual customer
  5. E) sells a variety of products to several target customer groups

 

78) Micromarketing differs from undifferentiated marketing in that micromarketing ________.

  1. A) ignores differences among buyers
  2. B) focuses on only a single market segment
  3. C) has one marketing mix for the entire market
  4. D) sells a variety of products to several target customer groups
  5. E) targets a single location or even a single customer

 

79) Solitaire Jewellers, a jewelry store in New York, sells custom-made jewelry. Customers are involved in the design process and can order one-of-a-kind jewels made of platinum, gold, and silver, as well as precious (diamonds, rubies, sapphires, emeralds) and semi-precious (tanzanite, etc.) gemstones. Every customer can order jewelry that is different from the friends of previous and future customers, and made to match their tastes. Solitaire Jewellers uses which of the following targeting strategies?

  1. A) mass marketing
  2. B) differentiated marketing
  3. C) concentrated marketing
  4. D) micromarketing
  5. E) undifferentiated marketing

 

80) Which of the following is true about concentrated marketing?

  1. A) It ignores differences among buyers.
  2. B) It has the advantages of simplicity and economies of scale.
  3. C) It allows a firm to focus all its time and resources on a single type of customer.
  4. D) It refers to firms that use a different marketing mix for each marketing segment.
  5. E) It refers to firms that use the same marketing mix for the entire market.

 

81) Amadillo Racing Automobiles Inc., a Detroit-based manufacturer of sports cars, makes automobiles of light weight and fine handling characteristics. The firm provides four brands of standardized racing cars. Although the firm is aware that there are other market segments, such as the small-car segment, the firm focuses its efforts only on racing cars. In this example, Amadillo Racing Automobiles Inc. uses which of the following targeting strategies?

  1. A) undifferentiated marketing
  2. B) mass marketing
  3. C) micromarketing
  4. D) concentrated marketing
  5. E) differentiated marketing

 

82) ________ refers to managing a business in a way designed to occupy a particular place in the minds of target customers.

  1. A) Positioning
  2. B) Vertical integration
  3. C) Horizontal integration
  4. D) Decentralization
  5. E) Delayering

 

 

83) ________ consists of the four key elements of marketing strategy: product, price, distribution, and customer communication.

  1. A) Positioning
  2. B) Marketing mix
  3. C) Social commerce
  4. D) Market development
  5. E) Product development

 

84) Which of the following is true about the elements of marketing mix?

  1. A) A firm’s marketing mix consists of the combination of print, broadcast, online, and other media to be used in the promotion campaign.
  2. B) Retailers sell to other companies, whereas wholesalers sell to individual consumers.
  3. C) Customer communication consists of the organized network of firms and systems that move goods and services from the producer to the customer.
  4. D) Channel decisions are independent of everything else in the marketing mix.
  5. E) Price elasticity is a measure of how sensitive customers are to changes in price.

 

 

85) ________ is an element of marketing mix that refers to a wide variety of persuasive techniques used by companies to communicate with their target markets and the general public.

  1. A) Distribution
  2. B) Promotion
  3. C) Decentralization
  4. D) Market segmentation
  5. E) Differentiation

 

 

86) Define marketing. Compare and contrast place marketing with cause-related marketing.

 

87) Compare and contrast needs with wants.

 

 

88) Compare and contrast marketing concept with product and sales concept.

 

89) Compare and contrast the influence of customer relationship management (CRM) systems on the marketing process with that of social commerce.

 

90) Compare and contrast surveys with interviews and focus groups.

 

91) Discuss the implications of stealth marketing for business communication transparency.

 

92) Compare and contrast consumer market with organizational market.

 

93) What is cognitive dissonance?

 

 

94) What are the steps involved in strategic marketing planning?

 

95) Compare and contrast market penetration with diversification.

 

96) Compare and contrast product development with market development. Explain using an example.

 

97) What is market segmentation. List the four fundamental factors marketers use to identify market segments.

 

98) Compare and contrast undifferentiated marketing with differentiated marketing.

 

99) Compare and contrast concentrated marketing with micromarketing.

 

100) What is marketing mix? Discuss the four main components of the marketing mix.

 

 

 

Chapter 14   Product and Pricing Strategies

 

Business in Action, 6e (Bovee/Thill)

Chapter 14   Product and Pricing Strategies

 

1) Providing education in return of fees is an example of a service.

 

 

2) Shopping products are particular brands that the buyer especially wants and will seek out, regardless of location or price.

 

 

3) Food grains and wheat are examples of shopping products.

 

 

 

4) Expense items are inexpensive products that organizations generally use within a year of purchase.

 

5) Capital items are less expensive than expense items.

 

6) A software firm buys 250 personal computers for a new facility that it is opening. This is an example of an expense item.

 

 

7) Product life cycle refers to the four stages through which a product progresses.

 

 

8) Crowdsourcing is a technique that companies use to generate new product ideas.

 

9) Prototypes are diagrammatic representations of a business model.

 

10) Commercialization refers to the large-scale production and distribution of products that have survived the testing process.

 

 

11) Target customers are familiar with a brand and are likely to consider buying it. This brand has high brand preference.

 

12) A logo is a graphical or textual representation of a brand.

 

13) A product carrying the label of a wholesaler is an example of a private brand.

 

 

14) License is an agreement to produce and market another company’s product in exchange for a royalty or fee.

 

15) A product line comprises all products from a single manufacturer.

 

 

16) Product mix is a complete list of all products that a company offers for sale.

 

17) Creating variations of an existing product is referred to as line stretching.

 

18) A firm uses the brand of an existing product on a new product in a different new category. This is an example of line filling.

 

 

19) Price elasticity is a measure of the sensitivity of demand to changes in price.

 

20) Variable costs are not dependent on the magnitude of production.

 

21) Break-even point refers to the sales volume at a given price that will cover all of a company’s costs.

 

22) Optimal pricing is a computer-based pricing method.

 

 

23) Skim pricing refers to introducing a new product at a low price in hopes of building sales volume quickly.

 

 

24) Participative pricing allows customers to pay the amount they think a product is worth.

 

25) Dynamic pricing refers to offering temporary price reductions to stimulate sales.

 

 

26) Which of the following is the best example of a good?

  1. A) e-learning storyboard
  2. B) digital music
  3. C) air travel
  4. D) life insurance
  5. E) a pair of shoes

 

 

 

27) A product is called a good if ________.

  1. A) its price is below the market standards
  2. B) it is predominantly tangible
  3. C) it has been standardized
  4. D) it is sold directly to the end consumers
  5. E) its price is above the market standards

 

28) ________ are everyday individual goods and services that people buy frequently without much conscious planning.

  1. A) Convenience products
  2. B) Shopping products
  3. C) Expense items
  4. D) Capital items
  5. E) Specialty products

 

 

29) Jennifer buys such items as bread, flour, and beverages every week from nearby shops. These items are examples of a(n) ________.

  1. A) shopping product
  2. B) expense item
  3. C) capital item
  4. D) specialty product
  5. E) convenience product

 

 

30) ________ are fairly important individual goods and services that people buy less frequently.

  1. A) Convenience products
  2. B) Expense items
  3. C) Specialty products
  4. D) Capital items
  5. E) Shopping products

 

31) John decides to buy a new car. He compares many products and considers such aspects as fuel efficiency, power, and size before finalizing a model. In this case, the new car is an example of a(n) ________.

  1. A) convenience product
  2. B) expense item
  3. C) specialty product
  4. D) capital item
  5. E) shopping product

 

32) ________ are particular brands that the buyer especially wants and will seek out.

  1. A) Specialty products
  2. B) Expense items
  3. C) Capital items
  4. D) Convenience products
  5. E) Shopping products

 

 

 

33) Expense items are ________.

  1. A) fairly important goods and services that people buy less frequently
  2. B) everyday goods and services that individuals buy
  3. C) inexpensive products that organizations generally use
  4. D) expensive organizational products with a longer useful life
  5. E) particular brands that the buyer especially wants and will seek out

 

34) Charles is the purchase agent for a consulting firm. He places orders for office stationeries and consumables once in two weeks. The purchases are made in large quantities and are billed in the firm’s name. The items that Charles buys are examples of ________.

  1. A) specialty products
  2. B) expense items
  3. C) capital items
  4. D) shopping products
  5. E) convenience products

 

 

35) ________ are expensive organizational products with a long useful life.

  1. A) Shopping products
  2. B) Capital items
  3. C) Expense items
  4. D) Specialty products
  5. E) Convenience products

 

36) Five college graduates decide to open a laundry service company. They import six commercial washing machines from Italy to set up a factory. In this case the commercial washing machines are best referred to as a(n) ________.

  1. A) capital item
  2. B) shopping product
  3. C) expense item
  4. D) convenience product
  5. E) specialty product

 

37) Research and development is carried out usually during the ________ stage of product development.

  1. A) maturity
  2. B) introduction
  3. C) growth
  4. D) saturation
  5. E) intensification

 

38) Absco computers introduced a low cost, cloud-based storage service. The company adopted a unit-based pricing for the product and many small businesses found the product to be very effective in reducing their storage costs. The sale of the product has increased swiftly in the recent months and is at an all time high. The product is presently in the ________ stage of product lifecycle.

  1. A) maturity
  2. B) growth
  3. C) saturation
  4. D) research
  5. E) introduction

 

 

39) The introductory stage will be followed by a ________ stage for a successful product.

  1. A) maturity
  2. B) research
  3. C) saturation
  4. D) growth
  5. E) infiltration

 

40) The maturity stage of product lifecycle is ________.

  1. A) a stage where a product’s price is at a high level
  2. B) usually the shortest stage in a product’s lifetime
  3. C) characterized by steep decline in profits
  4. D) typically followed by a growth stage
  5. E) a stage where firms have to win sales away from others

 

 

41) An organization decides to use crowdsourcing in its new-product development process. Crowdsourcing will be used during the ________ stage of product development.

  1. A) business analysis
  2. B) idea generation
  3. C) idea screening
  4. D) test marketing
  5. E) commercialization

 

 

42) People who monitor social media to spot shifts in consumer tastes are called ________.

  1. A) social arbitrators
  2. B) trend watchers
  3. C) crowd pullers
  4. D) social developers
  5. E) social programmers

 

43) Indoxo Autoparts is a company that manufactures automobile accessories. The company is considering the manufacture of a special type of helmet that helps reduce hair loss. The company conducts an online survey to know what customers think of this idea. This process of validating ideas through customers is known as ________.

  1. A) business analysis
  2. B) beta testing
  3. C) test marketing
  4. D) concept testing
  5. E) prototyping

 

 

44) During the business analysis stage, a company ________.

  1. A) sells the product on a limited basis to gauge its market appeal
  2. B) invests significantly in research and development
  3. C) reviews the sales, costs, and profit projections
  4. D) screens the business ideas that it has generated
  5. E) generates a wide variety of ideas to introduce a new product

 

45) Prototypes are ________.

  1. A) layouts used in the design of a product
  2. B) analysts who screen product ideas
  3. C) tools used to design a new product
  4. D) preproduction samples of products
  5. E) networks used in the commercialization of products

 

46) Goblo Chemicals is a Japanese drug manufacturer. The company has spent a considerable amount in R&D to invent a drug that fosters weight loss. The company has tested the product in-house and has now sold the product to a selected group of customers to gauge its demand. The company is in the ________ stage of product development now.

  1. A) idea screening
  2. B) business analysis
  3. C) commercialization
  4. D) idea generation
  5. E) test marketing

 

47) ________ is a product development stage in which a product is sold on a limited basis to gauge its market appeal.

  1. A) Business analysis
  2. B) Test marketing
  3. C) Crowdsourcing
  4. D) Prototyping
  5. E) Commercialization

 

48) A survey revealed that a product has good brand awareness. This means that ________.

  1. A) buyers will not accept substitutes of the brand
  2. B) the brand does not have many substitutes
  3. C) people are familiar with the brand
  4. D) the brand represents a specialty product
  5. E) majority considered the brand as a preferred one

 

49) Brand preference means that people ________.

  1. A) are not willing to accept substitutes for the product
  2. B) will purchase the product if it is available
  3. C) are willing to wait long for the product
  4. D) are not willing to experiment with other brands
  5. E) will buy the product only if it is availed in small numbers

 

50) ________ refers to a stage at which buyers will not accept a substitute for the product.

  1. A) Brand insistence
  2. B) Brand preference
  3. C) Brand saturation
  4. D) Brand awareness
  5. E) Brand knowledge

 

 

51) Which of the following refers to a graphical representation of a brand?

  1. A) brand equity
  2. B) brand name
  3. C) trademark
  4. D) logo
  5. E) prototype

 

52) ________ refer to brands that have been given legal protection so that their owners have exclusive rights to their use.

  1. A) Brand equities
  2. B) Prototypes
  3. C) Licenses
  4. D) Trademarks
  5. E) Brand marks

 

 

53) Co-branding is ________.

  1. A) a legal protection given to owners for exclusive rights to the use of brands
  2. B) a partnership to closely link brand names for a single product
  3. C) the process of selling a famous brand to a third party
  4. D) a method of testing and evaluating a new product
  5. E) an agreement to produce and market another company’s product

 

 

54) ________ is an agreement to produce and market another company’s product in exchange for a royalty or fee.

  1. A) Trademark
  2. B) License
  3. C) Patent
  4. D) Copyright
  5. E) Co-branding

 

55) Which of the following is a key difference between product mix and product line?

  1. A) Product line is the complete set of the products in an industry, whereas product mix is an incomplete set of products.
  2. B) Product mix contains products that are similar, whereas product line may contain dissimilar products also.
  3. C) A product mix is used by larger companies, whereas a product line is used by smaller companies.
  4. D) Product line is a set of heterogeneous goods or services whereas product mix is a set of homogenous products.
  5. E) Product mix includes all products from a single manufacturer, whereas product line contains a group of similar products.

 

 

56) Proctor and Gamble offers products under more than fifty brand names. The company’s products vary from cosmetics to cat foods. A complete list of all these products that the company offers will refer to the company’s ________.

  1. A) core product line
  2. B) marketing mix
  3. C) product mix
  4. D) product line
  5. E) co-branding list

 

57) ________ refers to developing items to fill gaps in the market that have been overlooked by competitors or have emerged as consumer tastes and needs shift.

  1. A) Brand extension
  2. B) Line filling
  3. C) Brand stretching
  4. D) Line extension
  5. E) Line stretching

 

 

58) Which of the following refers to creating variations of an existing product?

  1. A) brand extension
  2. B) line filling
  3. C) brand filling
  4. D) line extension
  5. E) line stretching

 

 

59) ________ refers to using the brand of existing products on products in a different new category.

  1. A) Brand filling
  2. B) Line extension
  3. C) Line filling
  4. D) Brand stretching
  5. E) Brand extension

 

60) Mr. White is a detergent brand. The brand is owned by Unitech, a company that produces consumer products. Unitech uses the same brand for a new kitchen utensil that the company is launching. Identify the product-line expansion method used in this case.

  1. A) brand extension
  2. B) brand stretching
  3. C) line filling
  4. D) line extension
  5. E) line stretching

 

61) Line stretching refers to ________.

  1. A) using the brand of existing products on products in a different new category
  2. B) adding items with price points above or below the current product line
  3. C) creating variations of a current product
  4. D) creating variations of an existing product
  5. E) developing items to fill gaps in the market that have been overlooked by competitors

 

62) MaCton is a Chinese manufacturer of personal computers. The company decides to extend its product line by adding two premium products that are priced much more than the existing products. Identify the product-line expansion method that the company is using.

  1. A) Brand extension
  2. B) Line filling
  3. C) Line extension
  4. D) Brand filling
  5. E) Line stretching

 

63) Using a brand name on a variety of related products is known as ________.

  1. A) brand filling
  2. B) brand extension
  3. C) line extension
  4. D) family branding
  5. E) brand stretching

 

 

64) Which of the following statements is true of a brand extension strategy?

  1. A) Brand extension cuts the costs and risks of introducing new products.
  2. B) It is used by firms that have a weak brand name.
  3. C) It is a strategy used by start-up firms.
  4. D) It refers to developing items to fill gaps in the market.
  5. E) Brand extension refers to creating variations of a product.

 

65) Price elasticity is a measure of the sensitivity of ________ to changes in price.

  1. A) variable cost
  2. B) demand
  3. C) income
  4. D) yield
  5. E) total cost

 

66) Which of the following is an example of a fixed cost that businesses have to incur?

  1. A) cost of raw materials
  2. B) cost of supplies
  3. C) shipping costs
  4. D) sales commissions
  5. E) cost of building plants

 

 

67) Which of the following is an example of a variable cost that businesses have to incur?

  1. A) insurance premiums
  2. B) real estate taxes
  3. C) unit-based incentives
  4. D) employee salaries
  5. E) mortgage payments

 

68) A group of fifteen entrepreneurs starts a manufacturing firm. The total fixed costs that they have incurred in setting up the business amounts to $50000. The variable cost of selling a unit of product is $25. What is the break-even point if each unit is priced at $50?

  1. A) 2000
  2. B) 500
  3. C) 333
  4. D) 666
  5. E) 1000

 

69) Break-even analysis is a method of ________.

  1. A) calculating the minimum sales needed to cover all costs
  2. B) classifying the variable costs incurred by a firm
  3. C) classifying the fixed costs incurred by a firm
  4. D) balancing the costs and risks of a business
  5. E) estimating the fixed costs required to minimize the operational costs

 

 

70) Cost-based pricing ________.

  1. A) uses a software to generate the ideal price for each item
  2. B) introduces a new product at a very low price
  3. C) is based on customer perceptions of cost
  4. D) doesn’t consider factors such as customer demand
  5. E) uses a high price for a new product during the introductory stages

 

71) ________ is a method of setting prices based on customer perceptions of a product’s worth.

  1. A) Cost-based pricing
  2. B) Optimal pricing
  3. C) Skim pricing
  4. D) Freemium pricing
  5. E) Value-based pricing

 

72) ________ is a computer-based pricing method that creates a demand curve for every product to help managers select a price that meets specific marketing objectives.

  1. A) Value-based pricing
  2. B) Cost-based pricing
  3. C) Freemium pricing
  4. D) Optimal pricing
  5. E) Participative pricing

 

 

73) Which of the following pricing methods is characterized by charging a high price for a new product during the introductory stage and lowering the price later?

  1. A) cost-based pricing
  2. B) value-based pricing
  3. C) optimal pricing
  4. D) skim pricing
  5. E) auction pricing

 

 

74) Rose Perfumes is a well known perfume brand in Europe. The firm markets a large collection of perfumes. In order to expand its business, the firm decides to enter the U.S. market. The firm keeps its prices very low to capture the market rapidly. Identify the pricing strategy that the firm is using.

  1. A) cost-based pricing
  2. B) value-based pricing
  3. C) penetration pricing
  4. D) freemium pricing
  5. E) optimal pricing

 

75) Skim pricing is used during the ________ stage of a product.

  1. A) introductory
  2. B) maturity
  3. C) decline
  4. D) growth
  5. E) saturation

 

76) Novice Telecom is a manufacturer of cell phones. The company is planning to launch a new model of smart phone and the pre-launch marketing has created much hype in the market. In order to cash in on the hype, the company charges a high price during the initial stages of the product’s launch. Identify the pricing strategy this company is using.

  1. A) optimal pricing
  2. B) skim pricing
  3. C) penetration pricing
  4. D) auction pricing
  5. E) freemium pricing

 

 

77) Penetration pricing doesn’t work if ________.

  1. A) the company can’t sustain the low price levels profitably
  2. B) there is some level of competition in the market
  3. C) a company is entering a market that is totally new
  4. D) the customers in a market are highly price sensitive
  5. E) the product is characterized by high extent of price elasticity

 

78) In ________, the seller doesn’t set a firm price but allows buyers to competitively propose the prices that they are willing to pay.

  1. A) cost-based pricing
  2. B) value-based pricing
  3. C) optimal pricing
  4. D) auction pricing
  5. E) freemium pricing

 

 

79) Which of the following is a pricing method that allows customers to pay the amount they think a product is worth?

  1. A) cost-based pricing
  2. B) participative pricing
  3. C) penetration pricing
  4. D) optimal pricing
  5. E) value-based pricing

 

80) A number of applications in the Android Market do not charge the customer for using the basic version of the application. However, the customers are charged if they want a version of the product with better features. This pricing strategy is referred to as ________ pricing.

  1. A) value-based
  2. B) freemium
  3. C) optimal
  4. D) auction
  5. E) penetration

 

81) ________ refers to continually adjusting prices to reflect changes in supply and demand.

  1. A) Freemium pricing
  2. B) Auction pricing
  3. C) Optimal pricing
  4. D) Dynamic pricing
  5. E) Participative pricing

 

82) ________ are temporary price reductions to stimulate sales or lower prices to encourage certain behaviors such as paying with cash.

  1. A) Promotions
  2. B) Discounts
  3. C) Auctions
  4. D) Brokerages
  5. E) Allowances

 

 

83) Products such as cosmetics are often sold together. The price offered for a set of products is usually lower than the overall price of individual units. This practice refers to ________.

  1. A) freemium pricing
  2. B) discounting
  3. C) bundling
  4. D) balanced pricing
  5. E) dynamic pricing

 

84) Select twenty products of your choice. Classify these products as goods and services.

 

85) Compare and contrast convenience products, shopping products, and specialty products.

 

86) Describe how products are classified according to their intended use.

 

87) Choose a product that has been widely regarded as successful. Construct a product life cycle model for the product that you have selected.

 

88) Choose ten different products from ten different industries. Classify each of these products according to the product life cycle stage they currently belong to.

 

89) Explain how a business analysis is carried out.

 

 

90) Explain how a firm conducts test marketing for a new product.

 

91) Compare and contrast national brands and private brands.

 

92) Compare and contrast co-branding and licensing.

 

93) Explain the significance of labeling.

 

94) What is a product line?

 

 

95) Explain the concept of price elasticity.

 

96) Choose a business that you want to launch. Construct an investment plan and estimate the break-even point for the business.

 

97) Compare and contrast cost-based pricing and value-based pricing.

 

 

98) Explain loss-leader pricing.

 

99) Identify a new product that you would like to launch in one of the cities in the United States. Choose a suitable pricing model for the product and design a pricing strategy.

 

100) Compare and contrast auctions and participative pricing.

 

 

Chapter 15   Distribution and Marketing Logistics

 

Business in Action, 6e (Bovee/Thill)

Chapter 15   Distribution and Marketing Logistics

 

1) Distribution strategy refers to a firm’s overall plan for moving products through intermediaries and on to final customers.

 

 

 

2) Unlike retailers, wholesalers primarily sell products to consumers for personal use.

 

 

3) Consumers (reached by retailers) and organizations (reached by wholesalers) respond to marketing programs the same way, because their motivations are similar.

 

4) Sam’s Club sells sports apparel to individual consumers for their personal use and to small businesses who resell those goods to consumers. Sam’s Club functions both as a retailer and a wholesaler.

 

5) Retail intermediaries collect valuable data about customer purchases: who buys, how often, and how much.

 

 

6) Full-service merchant wholesalers never actually own the products they handle, and they perform fewer services than agents and brokers.

 

7) Drop shippers take legal title to and possession of goods from a producer and then resell those goods to retailers or organizational buyers.

 

8) Merchant wholesalers that sell products to organizational customers for internal operations or the production of other goods, rather than to retailers for sale, are known as manufacturers’ representatives.

 

9) A growing number of customers are pursuing strategic sourcing, in which they forge closer relationships with a smaller number of strategic distribution partners.

 

 

10) Shopper marketing efforts can range from printed signs to in-store video screens to smartphone apps that help shoppers find products or stores in a mall.

 

11) Online retailers can be either Internet-only operations or online extensions of store-based operations.

 

 

12) The growth of online retailing has lagged store-based retailing in recent years.

 

 

13) Hybrid stores refers to stores that exist for only a short time and are designed more as attention-getting events than as ongoing retail operations.

 

 

14) Celebrations is a store that is only open for several weeks during the summer, selling fireworks and decorations before the 4th of July. It is designed more as an attention-getting event than as an ongoing retail operation. Celebrations would be an example of a convenience store.

 

15) Like wholesalers, retailers face the threat of disintermediation if suppliers or customers don’t think they add sufficient value, or if other types of retailers can do the job better.

 

 

16) The primary function of distribution channels is delivering value to producers, so channel strategy decisions should start with producers’ needs and expectations.

 

 

17) Products vary widely in the amount of skilled support they may require before and after a sale.

 

18) A slotting allowance is a payment to a retailer in exchange for carrying a producer’s products for an agreed-upon length of time.

 

19) The shortest distribution channel is from the producer, to the retailer, to the consumer.

 

 

20) Having your products available in as many outlets as possible is known as exclusive distribution.

 

 

 

21) Channel conflict refers to disagreement over rights and responsibilities of the organizations in a distribution channel.

 

 

22) Channel organization and control refers to attempts to coordinate the activities of a channel into a cohesive marketing system.

 

23) All activities required to move products from producer to consumer comprise the logistics function.

 

 

24) Order processing involves preparing orders for shipment and receiving orders when shipments arrive.

 

 

25) The coordinated use of multiple modes of transportation is known as warehousing.

 

26) Wholesalers differ from retailers in that wholesalers ________.

  1. A) sell products to organizational customers
  2. B) are marketing intermediaries
  3. C) primarily sell products to consumers for personal use
  4. D) cannot sell products to consumers for personal use
  5. E) create place utility and time utility

 

27) ________ refer(s) to intermediaries that sell products to other intermediaries for resale or to organizations for internal use.

  1. A) Retailers
  2. B) Wholesalers
  3. C) Department store
  4. D) Specialty store
  5. E) Convenience store

 

 

28) Retailers differ from wholesalers in that retailers ________.

  1. A) sell products to small-business owners
  2. B) sell products to wholesalers, government agencies, and educational institutions
  3. C) primarily sell products to consumers for personal use
  4. D) receive bulk shipments from producers
  5. E) create possession utility

 

29) Intermediaries that primarily sell goods and services to individuals for their own personal use are called ________.

  1. A) drop shippers
  2. B) agents
  3. C) brokers
  4. D) distributors
  5. E) retailers

 

30) One of the valuable services that a wholesaler might perform is ________, in which it receives large shipments from the producer and then sells smaller quantities to retailers.

  1. A) rack jobbing
  2. B) drop shipping
  3. C) bundling
  4. D) breaking bulk
  5. E) system integration

 

31) AMS Technologies, a computer hardware reseller, purchases computer components from leading manufacturers and builds fully operational personal-computer systems customized for specific consumer requirements, such as non-linear video editing capabilities. The firm sells its products to various companies and educational institutions. AMS Technologies belongs to which of the following class of intermediaries?

  1. A) retail outlet
  2. B) drop shippers
  3. C) manufacturers’ representatives
  4. D) system integrators
  5. E) specialty stores

 

32) Producers rely on a class of intermediaries called value-added resellers (VARs) to assist with which of the following functions?

  1. A) transport the goods from the producer to the retail outlets
  2. B) assist with advertising, in-store displays, and other promotional efforts
  3. C) provide market information
  4. D) divide bulk quantities into smaller packages
  5. E) complete or customize solutions for customers

 

33) Independently-owned businesses that buy from producers, take legal title to the goods, and then resell them to retailers or to organizational buyers, are called ________.

  1. A) agents
  2. B) brokers
  3. C) merchant wholesalers
  4. D) department stores
  5. E) manufacturers’ representatives

 

 

34) ________ are full-service merchant wholesalers that set up displays in retail outlets, stock inventory, and perform other services such as marking prices on merchandise.

  1. A) Rack jobbers
  2. B) Agents
  3. C) Brokers
  4. D) System integrators
  5. E) Value-added resellers

 

35) Natural resources such as lumber, grain and coal are usually marketed through ________ who take ownership but not physical possession of the goods.

  1. A) manufacturers’ representatives
  2. B) brokers
  3. C) rack jobbers
  4. D) drop shippers
  5. E) agents

 

36) Merchant wholesalers that sell products to organizational customers for internal operations or the production of other goods, rather than to retailers for resale, are called ________.

  1. A) manufacturers’ representatives
  2. B) drop shippers
  3. C) rack jobbers
  4. D) distributors
  5. E) system integrators

 

37) Which of the following is a defining characteristic of manufacturers’ representatives?

  1. A) They take ownership, but not physical possession, of the goods they handle.
  2. B) They sell various noncompeting products to customers in a specific region.
  3. C) They set up displays in retail outlets, stock inventory, and perform other services such as marking prices on merchandise.
  4. D) They sort, standardize, and divide bulk quantities into smaller packages.
  5. E) They complete or customize solutions for customers.

 

38) Merchant wholesalers differ from brokers in that merchant wholesalers ________.

  1. A) are generally paid a commission for arranging sales
  2. B) never actually own the products they handle
  3. C) take legal title to goods they distribute
  4. D) sell various noncompeting products to customers in a specific region
  5. E) offer a limited range of convenience goods, long service hours, and quick checkouts

 

39) Agents differ from merchant wholesalers in that agents ________.

  1. A) take legal title to goods they distribute
  2. B) never actually own the products they handle
  3. C) take ownership, but not physical possession, of the goods they handle
  4. D) provide a wide variety of services, such as storage, selling, order processing, delivery, and promotional support
  5. E) set up displays in retail outlets, stock inventory, and perform other services such as marking prices on merchandise

 

 

40) Which of the following is a defining characteristic of distributors?

  1. A) They do not take title to the goods they distribute.
  2. B) They take ownership, but not physical possession, of the goods they handle.
  3. C) They sell various noncompeting products to customers in a specific region.
  4. D) They complete or customize solutions for customers.
  5. E) They sell products to organizational customers for internal operations or the production of other goods.

 

41) Rack jobbers differ from drop shippers in that rack jobbers ________.

  1. A) provide fewer services
  2. B) perform services such as setting up displays in retail outlets
  3. C) sell goods and services to individuals for their own personal use
  4. D) customize solutions for customers
  5. E) take title to the goods they distribute

 

 

42) Which of the following is a defining characteristic of drop shippers?

  1. A) They take ownership, but not physical possession, of the goods they handle.
  2. B) They do not do take title to the goods they distribute but take possession of those goods.
  3. C) They sell various noncompeting products to customers in a specific region.
  4. D) They set up displays in retail outlets, stock inventory, and perform other services such as marking prices on merchandise.
  5. E) They complete or customize solutions for customers.

 

43) MacyPools is a firm that distributes pool chemicals, pool equipment, and pool supplies. The firm purchases the products from manufacturers, takes legal title to the goods, and then resells it to companies and government agencies. MacyPools also sells its products to small-business owners who then resell it to individuals for their own personal use. MacyPools can be classified as ________.

  1. A) brokers
  2. B) drop shippers
  3. C) merchant wholesalers
  4. D) manufacturers’ representatives
  5. E) a specialty store

 

 

44) M&K Wholesalers, owned by Jonathan McCloud, sells rough lumber to furniture manufacturers. M&K Wholesalers take ownership, but not physical possession, of the goods they handle. The firm does not keep goods in stock, but instead transfers customer orders and shipment details to American Timber and Lumber Inc., a producer and manufacturer of quality hardwood lumber. M&K Wholesalers can be classified as ________.

  1. A) brokers
  2. B) drop shippers
  3. C) agents
  4. D) value-added resellers
  5. E) manufacturers representatives

 

45) TechSource Inc. is a wholesaler of electronic components, including connectors and semiconductors. The firm purchases electronic components directly from technology manufacturers, has physical possession of the products, takes legal title to the goods, and then resells it to organizational customers for internal operations or the production of other goods. TechSource Inc. does not sell products to retailers for resale. TechSource Inc. can be classified as a(n) ________.

  1. A) drop shipper
  2. B) manufacturers’ representative
  3. C) agent
  4. D) distributor
  5. E) broker

 

 

46) JustBooks Company is a U.S.-based international wholesaler specializing in Afro-American books and children’s literature. The firm purchases books from publishers, has physical possession of the books, takes legal title to them, and sells them to retailers for resale. The firm also offers a wide variety of services including setting up displays in retail outlets, and marking prices on books. JustBooks Company can be classified as a(n) ________.

  1. A) rack jobber
  2. B) drop shipper
  3. C) broker
  4. D) agent
  5. E) specialty store

 

47) When the role of an intermediary is taken over by manufacturers upstream or customers downstream, ________ occurs.

  1. A) centralization
  2. B) disintermediation
  3. C) drop shipping
  4. D) market penetration
  5. E) horizontal integration

 

 

48) Which of the following is an example of disintermediation?

  1. A) A manufacturing firm introduces a new line of products.
  2. B) A manufacturing firm uses in-store marketing to help customers locate its products.
  3. C) A manufacturing firm chooses retailers that can provide customer support for its products.
  4. D) A manufacturing firm closely monitors the activities of its retailers to ensure that its brand image is not harmed.
  5. E) A manufacturing firm supplies its products directly to the retailers, instead of selling them to the wholesaler.

 

49) Weaver and Sharpe Inc., a firm that manufactures home & kitchen appliances, uses an intensive distribution strategy. However, the firm finds that the retailers in the same marketing area compete with each other for greater market share, which negatively affects the sale of Weaver and Sharpe products. Which of the following can help Weaver and Sharpe Inc. to resolve the problem of channel conflict?

  1. A) decentralization
  2. B) disintermediation
  3. C) centralization
  4. D) diversification
  5. E) product development

 

 

50) PopArt, an American manufacturer of music and pop culture-related clothing and accessories, sells its products to selected retail stores, who then resell them to consumers. However, the firm finds that the retail stores do not market their products effectively. PopArt begins to market its products directly to the consumers to have greater control over pricing, promotion, service, and delivery of their products. Thus the firm replaces the retailers. This exemplifies ________.

  1. A) decentralization
  2. B) disintermediation
  3. C) centralization
  4. D) diversification
  5. E) the wheel of retailing

 

51) InfiniTea Inc. is a manufacturer of a range of organic teas. The firm provides free samples of their products in stalls at retail stores that stock their products to increase their brand awareness. In this example, InfiniTea Inc. uses ________.

  1. A) stealth marketing
  2. B) cause-related marketing
  3. C) drop shipping
  4. D) shopper marketing
  5. E) disintermediation

 

 

52) Communication efforts directed at consumers while they are in the retail setting are referred to as ________.

  1. A) stealth marketing
  2. B) shopper marketing
  3. C) disintermediation
  4. D) breaking bulk
  5. E) cause-related marketing

 

53) ________ refers to an evolutionary process by which stores that feature low prices gradually upgrade until they no longer appeal to price-sensitive shoppers and are replaced by a new generation of leaner, low-price competitors.

  1. A) Benchmarking
  2. B) Decision tree model
  3. C) Hawthorne effect
  4. D) Wheel of retailing
  5. E) Hyper-retailing

 

 

54) Large stores that carry a variety of products in multiple categories, such as clothing, house wares, gifts, bedding, and furniture are termed as ________.

  1. A) specialty stores
  2. B) convenience stores
  3. C) department stores
  4. D) distributors
  5. E) drop shippers

 

55) Stores that carry only a particular type of goods, often with deep selection in those specific categories, are called ________.

  1. A) department stores
  2. B) specialty stores
  3. C) distributors
  4. D) drop shippers
  5. E) convenience stores

 

56) ________ refers to a type of specialty store that focuses on specific products on a massive scale and dominates retail sales in respective products categories.

  1. A) Warehouse club
  2. B) Department store
  3. C) Category killer
  4. D) Off-price store
  5. E) Hypermarket

 

57) PetCare is a retail store based in New York that offers only pet supplies and pet accessories. The shop stocks a limited number of product lines such as dog and cat products (canned and dry food, and hard goods), and bird, fish and small animal products (fish tanks, stands, aquarium decorations, cages, bowls, perches, etc). The shop stocks several brands of varying prices rages within these product lines. PetCare can be classified as a(n) ________.

  1. A) department store
  2. B) manufacturers’ representative
  3. C) supermarket
  4. D) specialty store
  5. E) convenience store

 

 

58) Discount stores differ from off-price retailers in that discount stores ________.

  1. A) sell limited selections of designer labels at steep discounts
  2. B) use e-commerce technologies to sell over the Internet
  3. C) offer a limited range of convenience goods, long service hours, and quick checkouts
  4. D) feature a wide variety of aggressively priced everyday merchandise
  5. E) focus on specific products on a massive scale and dominate retail sales in respective products categories

 

59) Off-price retailers differ from discount stores in that off-price retailers ________.

  1. A) offer many customer services
  2. B) require club membership
  3. C) offer a limited range of convenience goods, long service hours, and quick checkouts
  4. D) sell a variety of everyday goods below the market price by keeping their overhead low
  5. E) sell designer labels and other fashionable products at steep discounts

 

 

60) Which of the following is a key feature of a supermarket?

  1. A) It is a store that offers a complete selection in a narrow range of merchandise.
  2. B) It is a large outlet store that sells discontinued items, overruns, and factory seconds.
  3. C) It is a web-based store that offers anything from a single product line to comprehensive selections in multiple product areas.
  4. D) It is a large, self-service store that offers a wide selection of food and non-food merchandise.
  5. E) It is a store that sells designer labels and other fashionable products at steep discounts.

 

61) Which of the following statements is true about retailing formats?

  1. A) Online retailers can be either Internet-only operations or online extensions of store-based operations.
  2. B) Off-price retailers refer to large stores that carry a variety of products in multiple categories, such as clothing, house wares, gifts, bedding, and furniture.
  3. C) Department stores sell various noncompeting products to customers in a specific region.
  4. D) All retailing efforts can be divided into wholesalers and distributors.
  5. E) The replacement of intermediaries by producers when the producers can perform channel functions more effectively is referred to as the wheel of retailing.

 

62) Retail stores that exist for only a short time and are designed more as attention-getting events than as ongoing retail operations are called ________.

  1. A) pop-up stores
  2. B) retail theaters
  3. C) hybrid stores
  4. D) off-price stores
  5. E) specialty stores

 

63) Stores that specialize in Halloween costumes and decorations open in retail spots in middle-class areas during the beginning of September. These stores typically sell unusual items like animatronic witches, various stage props, as well as a range of makeup, wigs, etc. They are temporary stores, and close shortly after Halloween. These stores would be examples of ________.

  1. A) pop-up stores
  2. B) retail theaters
  3. C) distributors
  4. D) off-price stores
  5. E) drop shippers

 

 

64) ________ combine different types of retailers or different retail companies in the same facility.

  1. A) Pop-up stores
  2. B) Interactive kiosks
  3. C) Off-price stores
  4. D) Factory outlets
  5. E) Hybrid stores

 

65) Hybrid stores differ from pop-up stores in that hybrid stores ________.

  1. A) exist for only a short time
  2. B) combine different types of retailers in the same facility
  3. C) require club membership
  4. D) are designed more as attention-getting events than as ongoing retail operations
  5. E) focus on specific products on a massive scale

 

 

66) The Bookstop, a chain of bookstores in the United States, sells books to individuals for personal use. The firm began with a traditional retail storefront, and then began to “sell through” mail order catalogs as well. Recently, the store also opened a website and sells its books online. The website also allows customers to place requests for specific books that are not in the stock. In this example, The Bookstop uses ________.

  1. A) strategic sourcing
  2. B) disintermediation
  3. C) retail theater
  4. D) multichannel retailing
  5. E) wheel of retailing

 

67) ________ refers to the addition of entertainment or education aspects to the retail experience.

  1. A) Multichannel retailing
  2. B) Off-price retailers
  3. C) Unbundling of services
  4. D) Retail theater
  5. E) Wheel of retailing

 

68) When you enter a Sonicboom store, you won’t find shelves of its products. Instead, it has attractive, interactive displays that help you “audition” various Sonicboom music players. The store has a soundproof room where customers can listen to music and play high-definition videos, see and hear the audio and video performance of Sonicboom products. Customers are given free monthly newsletters, with reviews of Sonicboom, and articles on latest trends in the music industry. This would be an example of ________.

  1. A) strategic sourcing
  2. B) disintermediation
  3. C) retail theater
  4. D) multichannel retailing
  5. E) wheel of retailing

 

69) The ________ is a combination of intermediaries and channels that producers use to reach its target customers.

  1. A) marketing mix
  2. B) trading channel
  3. C) distribution mix
  4. D) wheel of retailing
  5. E) market segmentation

 

70) Because grocery stores have limited shelf space for products, they often require a(n) ________ from producers before they will agree to carry a new, unproven product.

  1. A) space allotment
  2. B) slotting allowance
  3. C) channel conflict allowance
  4. D) opportunity cost
  5. E) bandwidth payment

 

71) The number of layers between producers and their target customers is known as ________.

  1. A) market coverage
  2. B) channel length
  3. C) logistics
  4. D) wheel of retailing
  5. E) multichannel retailing

 

 

72) Market coverage refers to ________.

  1. A) the arrangements by which channel partners coordinate their activities under the leadership of one of the partners
  2. B) the number of layers between producers and target customers
  3. C) all the activities required to move finished products from the producer to the consumer
  4. D) the planning, movement, and flow of goods and related information throughout the supply chain
  5. E) the number of wholesalers or retailers that will carry a product

 

73) ________ refers to a market coverage strategy that tries to place a product in as many outlets as possible.

  1. A) Intensive distribution
  2. B) Selective distribution
  3. C) Exclusive distribution
  4. D) Disintermediation
  5. E) Strategic sourcing

 

 

74) Only specially selected retailers are allowed to stock and sell the orthopedic shoes by Ace Footware Manufacturers. The firm sells through a limited number of retailers and develops solid working relationships with the retailers to ensure that the product is properly merchandised. The retailers selling the products also provide sales and service support for Ace Footware products. Ace Footware Manufacturers uses which of the following market coverage strategies?

  1. A) strategic sourcing
  2. B) multichannel retailing
  3. C) selective distribution
  4. D) retail theater
  5. E) disintermediation

 

75) CTM Manufacturers, a firm that manufactures luxury cars, offers its products in only one outlet in each market area. The car dealers are carefully chosen by the firm and monitored to ensure that CTM cars are properly merchandised. The firm chooses the optimum number of outlets carefully to balance cost and market coverage. CTM Manufacturers uses which of the following market coverage strategies?

  1. A) selective distribution
  2. B) exclusive distribution
  3. C) intensive distribution
  4. D) disintermediation
  5. E) multichannel retailing

 

 

76) Hamilton Manufacturing Group manufactures stationary products such as various types of pens, papers, pencils, paper clips, etc. The firm tries to place a product in as many outlets as possible. Hamilton Manufacturing Group works with wholesalers and retailers of many types to ensure that their products have a wide market coverage. Hamilton Manufacturing Group uses which of the following strategies?

  1. A) intensive distribution
  2. B) selective distribution
  3. C) multichannel retailing
  4. D) exclusive distribution
  5. E) disintermediation

 

77) Intensive distribution differs from selective distribution in that intensive distribution ________.

  1. A) offers products in only one outlet in each market area
  2. B) tries to place a product in as many outlets as possible
  3. C) refers to producers that sell directly to consumers
  4. D) involves selling through a limited number of outlets
  5. E) involves retailers that give the product adequate sales and service support

 

 

78) Exclusive distribution differs from intensive distribution in that exclusive distribution ________.

  1. A) involves offering products in a limited number of outlets in each market area
  2. B) requires wholesalers and retailers of many types
  3. C) refer to producers who sell directly to customers
  4. D) tries to place a product in as many outlets as possible
  5. E) offers products in only one outlet in each market area

 

79) Disagreement over rights and responsibilities of the organizations in a distribution channel is termed as ________.

  1. A) shopper marketing
  2. B) category killer
  3. C) channel conflict
  4. D) disintermediation
  5. E) positioning

 

80) Arrangements by which channel partners coordinate their activities under the leadership of one of the partners is termed as ________.

  1. A) vertical integration
  2. B) benchmarking
  3. C) affirmative action
  4. D) marketing systems
  5. E) disintermediation

 

81) ________ refers to the planning, movement, and flow of goods and related information throughout the supply chain.

  1. A) Logistics
  2. B) Distribution mix
  3. C) Wheel of retailing
  4. D) Marketing mix
  5. E) Multichannel retailing

 

 

82)  Advanced warehouse facilities that specialize in collecting and shipping merchandise are called ________.

  1. A) distribution centers
  2. B) digital networks
  3. C) outboard transportations
  4. D) retail outlets
  5. E) warehouse clubs

 

83) Which of the following is the cheapest method of transportation?

  1. A) rail
  2. B) trucks
  3. C) ships and barges
  4. D) pipelines
  5. E) air

 

 

84) ________ refers to the coordinated use of multiple modes of transportation, particularly with containers that can be shipped by truck, rail, and sea.

  1. A) Digital networks
  2. B) Intermodal transportation
  3. C) Intensive distribution
  4. D) Selective distribution
  5. E) Marketing system

 

85) Which of the following statements is true about physical distribution and logistics?

  1. A) Physical distribution refers to the planning, movement, and flow of goods and related information throughout the supply chain.
  2. B) Forecasting includes a number of activities, such as recording the sale, making the appropriate accounting entries, and billing the customer.
  3. C) Containerized shipping restricts flexibility in transportation.
  4. D) Air transport tends to be the cheapest method of transportation.
  5. E) In a typical distribution center, goods produced at a variety of locations are collected, sorted, coded, and redistributed to fill customer orders.

 

86) Compare and contrast wholesalers with retailers.

 

87) Discuss the distribution functions performed by wholesalers and retailers.

 

88) Compare and contrast merchant wholesalers with agents and brokers.

 

89) Compare and contrast full-service merchant wholesalers with limited-service merchant wholesalers.

 

90) What is disintermediation? What are the similarities and differences between disintermediation and unbundling of services?

 

91) What is the wheel of retailing?

 

 

92) Compare and contrast department stores with specialty stores.

 

93) Compare and contrast discount stores with off-price retailers?

 

94) Compare and contrast multichannel retailing with retail theater.

 

95) What is a distribution mix? List the issues that need to be considered while choosing distribution channels.

 

96) What are slotting allowances?

 

97) Compare and contrast intensive distribution with selective distribution.

 

98) Discuss marketing systems.

 

99) Compare and contrast order processing with warehousing.

 

100) Compare and contrast transportation through air with transportation via water. What is intermodal transportation.

 

 

Chapter 16   Customer Communication

 

Business in Action, 6e (Bovee/Thill)

Chapter 16   Customer Communication

 

1) The new social model of customer communication is unidirectional and intrusive.

 

 

2) Reminder advertising tells past customers that a product is still available or a company is ready to serve their needs.

 

 

3) Six months after you bought a new car, you receive a letter from the manufacturer telling you about a special price being offered by the dealer for an oil change. This is an example of “reminder advertising.”

 

4) One of the most significant changes that the social communication model has brought to marketing is that companies now have far less control of their messages.

 

5) The blend of communication vehicles a company uses to reach its current and potential customers is its marketing mix.

 

 

6) With a push strategy, the producer appeals directly to end customers.

 

 

7) According to the FTC, you can support claims for your product by offering a money-back guarantee or providing letters from satisfied customers.

 

8) Comparative advertising is useful whenever a company believes it has some specific product strengths that are important to customers.

 

 

9) Institutional advertising refers to advertising that presents a company’s opinions on public issues such as education or health care.

 

10) Business-to-business advertising relies heavily on emotional appeals.

 

 

11) The thinking behind celebrity involvement in advertising is that people will be more inclined to use products endorsed by a celebrity because they will identify with and want to be like this person.

 

12) One of the biggest disadvantages to advertising in newspapers is declining readership in many cities.

 

 

13) The paid display or use of products in television shows, movies, and video games is referred to as media mix.

 

14) When you go to a website for textbooks, a pop-up ad appears for another company. This is an example of direct marketing.

 

 

15) The measurability of direct marketing is one of its greatest appeals.

 

16) Targeted display advertising allows customers or website visitors to opt-in to mailing lists.

 

 

17) National Do Not Call Registry gives individuals the opportunity to have their numbers removed from telemarketers’ lists.

 

18) The first step in the personal-selling process is uncovering needs and presenting solutions.

 

19) In a canned sales pitch, the salesperson focuses on questioning and listening before offering a solution that meets each prospect’s unique needs.

 

20) Sales promotion consists of two basic categories: consumer promotion and trade promotion.

 

 

21) Paper couponing is an efficient technique.

 

 

22) With rebates, companies offer partial reimbursement of the price as a purchase incentive.

 

 

23) The chief downside of trade allowances is that they can create the controversial practice of forward buying, in which customers load up on merchandise while the price is low.

 

24) The social communication model is limited to the consumer sector.

 

 

25) Brand communities refer to formal or informal groups of people united by their interest in and ownership of particular products.

 

 

26) The new social model of customer communication differs from the conventional promotion model in that the social communication model ________.

  1. A) is unidirectional and intrusive
  2. B) is hierarchical and static
  3. C) views audiences as passive recipients of messages
  4. D) is interactive and conversational
  5. E) broadcasts carefully scripted messages to a mass audience

 

27) The conventional promotion model differs from the new social model of customer communication in that the conventional promotion model ________.

  1. A) tends to be interactive and conversational
  2. B) tends to be bidirectional or multidirectional
  3. C) tends to have a higher message frequency
  4. D) focuses on collaboration with customers
  5. E) tends to be intrusive and unidirectional

 

 

28) The defining characteristic of which of the following types of advertisements is that it tells past customers that a product is still available or a company is ready to serve their needs?

  1. A) reminder advertising
  2. B) cooperative advertising
  3. C) bait and switch advertising
  4. D) comparative advertising
  5. E) advocacy advertising

 

29) The single most important idea the company hopes to convey to its target audience about a product is the ________.

  1. A) promotional mix
  2. B) marketing mix
  3. C) core message
  4. D) call to action
  5. E) media mix

 

30) In the commercial for their new asthma drug, CHL Pharmaceuticals suggests that viewers should consult with their doctors for more information about the medication. In this example, CHL Pharmaceuticals uses which of the following strategies?

  1. A) push strategy
  2. B) bait and switch
  3. C) behavioral targeting
  4. D) pull strategy
  5. E) remarketing

 

31) A promotional strategy that focuses on intermediaries is termed as ________.

  1. A) push strategy
  2. B) digital strategy
  3. C) pull strategy
  4. D) operations strategy
  5. E) pricing strategy

 

 

32) A promotional strategy that directly stimulates consumer demand via advertising and other communication efforts is known as ________.

  1. A) pricing strategy
  2. B) push strategy
  3. C) digital strategy
  4. D) pull strategy
  5. E) operations strategy

 

33) Push strategy differs from pull strategy because in push strategy a producer ________.

  1. A) appeals directly to end customers
  2. B) uses integrated marketing communications
  3. C) focuses on wholesalers or retailers
  4. D) uses reminder advertising
  5. E) uses “bait and switch” advertising

 

34) Pull strategy differs from push strategy because in pull strategy a producer ________.

  1. A) supports advertising claims with real evidence
  2. B) appeals directly to end customers
  3. C) focuses on intermediaries
  4. D) motivates wholesalers to promote its products
  5. E) uses integrated marketing communications

 

 

 

35) Roseberry Inc., an American grocery manufacturing firm, introduces a new brand of cookies and snacks called TasteyBites. The firm negotiates with several retailers and wholesalers to stock TasteyBites range of cookies and snacks, as well as promote them thorough in-store marketing activities. However, the firm does not directly market its products to end consumers. In this example, Roseberry Inc. uses which of the following promotional strategies?

  1. A) digital strategy
  2. B) pull strategy
  3. C) operations strategy
  4. D) pricing strategy
  5. E) push strategy

 

36) FunLearning Inc. is an American manufacturer of science kits and build-it toys for children between 3 and 12 years of age. The firm uses organic and eco-friendly policies. It invests a lot of money in advertisements aimed at increasing its brand awareness. The advertisements encourage customers to ask local retailers for FunLearning toys. In this example, FunLearning Inc. uses which of the following promotional strategies?

  1. A) operations strategy
  2. B) digital strategy
  3. C) pull strategy
  4. D) push strategy
  5. E) pricing strategy

 

 

37) Trying to attract buyers by advertising a product that you don’t intend to sell, and then trying to sell them another, usually more expensive, product is known as ________.

  1. A) stealth advertising
  2. B) bait and switch advertising
  3. C) implied claims
  4. D) reminder advertising
  5. E) a push strategy

 

38) The government agency that has the authority to impose penalties against advertisers who violate federal standards for truthful advertising is the ________.

  1. A) Federal Communications Commission
  2. B) Consumer Product Safety Commission
  3. C) Federal Trade Commission
  4. D) Federal Advertising Administration
  5. E) Federal Regulatory Commission

 

 

39) E-Shopper is an online retailer of books, movies, music, games, electronics, toys, apparel and general home items. The firm tracks the online activities of website visitors such as the links that their website visitors click on, the searches they make, and the things that they interact with. Based on this information, they serve up ads based on what the website visitor appears to be interested in. In this example, E-Shopper uses which of the following promotional strategies?

  1. A) behavioral targeting
  2. B) bait and switch advertising
  3. C) remarketing
  4. D) comparative advertising
  5. E) reminder advertising

 

40) In ________, behaviorally targeted ads follow users even as they move on to other Web sites.

  1. A) attack ads
  2. B) advocacy advertising
  3. C) cooperative advertising
  4. D) remarketing
  5. E) search engine marketing

 

41) KM Group, a home products manufacturer, owns a brand of paper towels called EasyWipes. The firm creates a commercial showing how an EasyWipes paper towel absorbs a spill faster than the competitor’s paper towel. In this example, the commercial used by KM Group can be classified as a(n) ________ advertising.

  1. A) institutional
  2. B) guerrilla
  3. C) comparative
  4. D) stealth
  5. E) cooperative

 

42) A television commercial promoting a new range of naturally-flavoured ice creams, manufactured by Ice Fountain, an ice cream and candy manufacturing firm, is an example of which of the following elements in the communication mix?

  1. A) institutional advertising
  2. B) sales promotion
  3. C) social media
  4. D) product advertising
  5. E) personal selling

 

 

43) Institutional advertisements that present a company’s point of view on public issues such as education or health care are known as ________ advertising.

  1. A) product
  2. B) comparative
  3. C) cooperative
  4. D) advocacy
  5. E) consultative

 

44) Advertising that seeks to create goodwill and to build a desired image for a company, rather than to promote specific products is termed as ________.

  1. A) product advertising
  2. B) institutional advertising
  3. C) comparative advertising
  4. D) bait and switch advertising
  5. E) reminder advertising

 

 

45) ________ involves a financial arrangement in which companies with products sold nationally share the costs of local advertising with local marketing intermediaries.

  1. A) Cooperative advertising
  2. B) Prospecting
  3. C) Canned sales pitch
  4. D) Specialty advertising
  5. E) Trade allowances

 

46) Premium Hardware is an American manufacturer of hardware products that sells its products across the country. The firm runs a full-page ad in the local newspapers in Chicago, advertising specials that are available at Venture Hardware Store, a chain of retail outlets in Chicago. Since both Venture Hardware Store and Premium Hardware have shared the cost of this ad, this would be ________ advertising.

  1. A) comparative
  2. B) bait and switch
  3. C) reminder
  4. D) specialty
  5. E) cooperative

 

47) TechSmart Inc., a software solutions firm, runs full-page advertisements in the newspaper and commercials emphasizing the firm’s commitment to employment generation, affirmative action, and multiculturalism. The aim of the promotional strategy is to create goodwill and build a positive image for the firm. In this example, TechSmart Inc. uses ________ advertising.

  1. A) product advertising
  2. B) institutional advertising
  3. C) comparative advertising
  4. D) bait and switch advertising
  5. E) reminder advertising

 

48) Amgen Laboratories Ltd., a pharmaceutical company, runs advertisements and commercials promoting child health and stressing healthy eating habits in children. These advertisements also provide health tips to parents. In this example, Amgen Laboratories Ltd. uses ________ advertising.

  1. A) product
  2. B) comparative
  3. C) advocacy
  4. D) cooperative
  5. E) consultative

 

49) ________ refers to a creative tactic designed to capture the audience’s attention and promote preference for the product or company being advertised.

  1. A) Media mix
  2. B) Advertising appeal
  3. C) Advertising media
  4. D) Specialty advertising
  5. E) Communication mix

 

 

50) Myers and Co., a firm that manufactures fire alarm systems for organizational customers, uses statistics, product testing reports, and other quality assurance certificates to convince corporate clients of the effectiveness of their products. In this example, Myers and Co. uses advertising appeal based on ________.

  1. A) logic
  2. B) emotion
  3. C) humor
  4. D) scarcity
  5. E) sentiment

 

51) The ad that tells you to “call within the next ten minutes because supplies are limited” is using advertising appeal based on ________.

  1. A) logic
  2. B) emotion
  3. C) humor
  4. D) scarcity
  5. E) sentiment

 

 

52) Which of the following is an advantage of using newspapers as an advertising media?

  1. A) long lead time for placing ads
  2. B) low visual competition from other ads
  3. C) extensive market coverage
  4. D) long life span
  5. E) printed papers have rapidly increasing readership in most cities

 

 

53) One significant advantage to using television for advertising is the ________.

  1. A) entertainment carryover
  2. B) high audience selectivity
  3. C) long life for the message
  4. D) short preparation time
  5. E) low cost for production

 

54) Which of the following is an advantage of product placement?

  1. A) It is predictable.
  2. B) Its effectiveness is independent of the popularity of the programming.
  3. C) It provides extensive choice of vehicles.
  4. D) It offers a way to get around viewers’ advertising filters.
  5. E) It has low visibility.

 

 

55) Which of the following is a disadvantage of product placement?

  1. A) It cannot get around viewers’ advertising filters.
  2. B) It is predictable.
  3. C) It provides extensive choice of vehicles.
  4. D) It has less scope for visibility in the right program.
  5. E) Its effectiveness is linked to the popularity of the programming.

 

56) Which of the following is a disadvantage of using fixed web (from stationary computers) as an advertising media?

  1. A) reduced clutter
  2. B) limited media options
  3. C) cannot be measured
  4. D) changes and additions cannot be made easily
  5. E) extreme degree of audience fragmentation

 

57) Orville Manufacturers produce a popular line of cola drinks called Pep-Up. In order to promote the drink, the firm pays the producers of a popular television show to depict some of the characters drinking Pep-Up drinks. In this example, Orville Manufacturers uses ________.

  1. A) integrated advertising
  2. B) product placement
  3. C) advocacy advertising
  4. D) stealth marketing
  5. E) push strategy

 

58) Some interactive purchasing systems combine product placement with direct-response retailing so that consumers can use their TV remotes to buy products shown in a program. This is an example of ________.

  1. A) behavioral targeting
  2. B) push strategy
  3. C) hybrid media
  4. D) implied claims
  5. E) remarketing

 

 

59) Using personalized letters and email messages to deliver targeted messages to individual consumers or organizational purchasers would be classified as ________.

  1. A) institutional advertising
  2. B) direct marketing
  3. C) product placement
  4. D) guerrilla advertising
  5. E) personal selling

 

60) Direct marketing differs from advertising in that direct marketing ________.

  1. A) is carried by someone else’s medium
  2. B) promotes the features and benefits of specific products
  3. C) refers to personal sales contacts
  4. D) involves the purchase of time or space in other media
  5. E) often uses personally addressable media

 

 

61) Advertising differs from direct marketing in that advertising ________.

  1. A) often uses personally addressable media
  2. B) doesn’t involve the purchase of time or space in other media
  3. C) often excludes a direct response aspect
  4. D) works to build lasting relationships with customers
  5. E) involves personal sales contacts

 

 

62) Which of the following statements is true about direct marketing?

  1. A) Direct marketing refers to one-on-one interaction between a salesperson and a prospective buyer.
  2. B) In direct marketing, the salesperson acts as an advisor who helps customers find the best solutions to their needs.
  3. C) It is difficult to measure the results of direct marketing efforts.
  4. D) Direct marketing is a static approach, with little scope for experimentation and improvement.
  5. E) The heart of any direct marketing effort is a customer database.

 

63) If a company asks its customers or website visitors to opt-in to its mailing lists, it is using ________.

  1. A) stealth marketing
  2. B) search engine marketing
  3. C) targeted display advertising
  4. D) permission-based marketing
  5. E) remarketing

 

 

64) Fashion Tree, an online retailer of fashion apparel, asks its website visitors if they want to opt-in to its mailing list, via a pop-up screen. This enables the firm to avoid annoying its customers. Every month Fashion Tree sends an e-mail highlighting current fashion trends to individuals who opt-in to its mailing list. In this example, Fashion Tree uses ________.

  1. A) remarketing
  2. B) stealth marketing
  3. C) search engine marketing
  4. D) targeted display advertising
  5. E) permission-based marketing

 

65) ________ involves ads with graphical content served up on web pages based on some knowledge of an individual’s interests or behaviors.

  1. A) Targeted display advertising
  2. B) Infomercials
  3. C) Institutional advertising
  4. D) Guerrilla advertising
  5. E) Product placement

 

 

66) One-on-one interaction between a salesperson and a prospective buyer is called ________.

  1. A) personal selling
  2. B) direct marketing
  3. C) prospecting
  4. D) sales promotion
  5. E) specialty advertising

 

67) In ________, a salesperson acts as a consultant and advisor who helps current and potential customers find the best solutions to their personal or business needs.

  1. A) direct marketing
  2. B) prospecting
  3. C) consultative selling
  4. D) specialty advertising
  5. E) sales promotion

 

68) The process of finding and qualifying potential customers is known as ________.

  1. A) consultative selling
  2. B) behavioral targeting
  3. C) consumer promotion
  4. D) prospecting
  5. E) trade promotion

 

69) Joseph is a new sales agent at Clevenger & Co., a firm that sells life and health insurance plans. Joseph is asked to generate a list of individuals in a specific neighborhood who might need insurance services, and then shortlist those individuals who are likely to have the available money to purchase the firm’s insurance plans. In this example, the task given to Joseph is termed as ________.

  1. A) consumer promotion
  2. B) consultative selling
  3. C) prospecting
  4. D) behavioral targeting
  5. E) trade promotion

 

 

70) In ________, the salesperson recites or even reads a stock message, with no regard for the customer’s unique circumstances.

  1. A) canned sales pitch
  2. B) prospecting
  3. C) direct marketing
  4. D) behavioral targeting
  5. E) consultative selling

 

71) ________ involve(s) short-term incentives to build the reputation of a brand and stimulate interest in a product.

  1. A) Direct selling
  2. B) Sales promotion
  3. C) Institutional advertising
  4. D) Public relations
  5. E) Brand communities

 

 

72) ________ refer(s) to printed or electronic certificates that offer discounts on particular items and are redeemed at the time of purchase.

  1. A) Coupons
  2. B) Rebates
  3. C) Premiums
  4. D) Trade allowances
  5. E) Trade promotions

 

73) The manufacturers of Zap Deodorant, a newly launched brand of men’s deodorants, decide to provide coupons for 50-cents off on all their products in the Sunday newspaper. This is an example of what element in the communication mix?

  1. A) conversation advertising
  2. B) social media
  3. C) public relations
  4. D) personal selling
  5. E) sales promotion

 

74) Advertising or display materials set up at retail locations to promote products to potential customers as they are making their purchase decisions are called ________.

  1. A) rebates
  2. B) trade allowances
  3. C) point-of-purchase displays
  4. D) specialty advertising
  5. E) coupons

 

75) Jones’ Treats, a food manufacturing company located in Massachusetts, produces a range of candy products. The firm negotiates with its retailers to set up jars with Jones’ Treats candies at the billing counters. Jones’ Treat also puts up wall posters and window clings advertising its candies in the retail stores that stock its products. In this example, Jones’ Treats uses which of the following promotional strategies?

  1. A) rebates
  2. B) trade allowances
  3. C) point-of-purchase displays
  4. D) specialty advertising
  5. E) coupons

 

76) Luminescent Inc. manufactures and sells products related to surfing, skateboarding, and snowboarding. During Christmas, the firm gave free sports bottles with a Luminescent logo to all its customers, with the aim of keeping the firm’s name in front of customers for a long period of time. This is an example of ________ advertising.

  1. A) institutional
  2. B) comparative
  3. C) cooperative
  4. D) consultative
  5. E) specialty

 

77) Free or bargain-priced items offered to encourage consumers to buy a product are termed as ________.

  1. A) premiums
  2. B) point-of-purchase displays
  3. C) coupons
  4. D) rebates
  5. E) trade allowances

 

78) Bell Laboratories, a pharmaceutical company, launches a new, over-the-counter drug for pain relief. The firm supplies the new drug to pharmacies and physicians at a discounted rate to encourage the retailers to carry the new product. In this example, Bell Laboratories uses which of the following promotional strategies?

  1. A) point-of-purchase displays
  2. B) product placement
  3. C) conversation marketing
  4. D) trade allowances
  5. E) premiums

 

79) The chief downside of trade allowances is that they can lead to ________, in which the retailer buys a large quantity of a product when the price is low, thus reducing the producer’s profit in the long run.

  1. A) push marketing
  2. B) forward buying
  3. C) slotting allowances
  4. D) viral marketing
  5. E) pull strategies

 

 

80) Discounts or other financial considerations offered by producers to wholesalers and retailers are termed as ________.

  1. A) trade allowances
  2. B) point-of-purchase displays
  3. C) product placement
  4. D) conversation marketing
  5. E) premiums

 

81) Word-of-mouth marketing is often called ________.

  1. A) guerrilla advertising
  2. B) institutional advertising
  3. C) sales promotion
  4. D) prospecting
  5. E) viral marketing

 

 

82) Matrix Electronics Inc. is a manufacturer of flash equipment for photography. The firm has a discussion forum in its official website aimed at facilitating customers and other audiences to connect with the company and with each other. Matrix Electronics Inc. often invites professional photographers to join these discussion threads, to enable budding photographers to better their craft. In this example, Matrix Electronics Inc. uses ________.

  1. A) conversation marketing
  2. B) advocacy advertising
  3. C) guerrilla advertising
  4. D) sales promotion
  5. E) product placement

 

83) ________ encompasses a wide variety of nonsales communications that businesses have with their many stakeholders, including communities, investors, industry analysts, government agencies, and activists.

  1. A) Push strategy
  2. B) Trade allowances
  3. C) Brand communities
  4. D) Public relations
  5. E) Pull strategy

 

 

84) Immediately after a news report about people getting sick from eating at Waikiki Delights, a delicatessen store, the President of Waikiki Delights appeared on a number of TV shows to describe their stringent supply chain management and health regulations. This communication can be best classified as ________.

  1. A) sales promotion
  2. B) conversation advertising
  3. C) social media
  4. D) public relations
  5. E) personal selling

 

85) An in-person or online gathering of media representatives at which companies announce new information is called a ________.

  1. A) press conference
  2. B) press release
  3. C) conversation marketing
  4. D) sale promotion
  5. E) trade promotion

 

86) Compare and contrast the conventional promotion model with the new social model of customer communication.

 

87) Compare and contrast push strategy with pull strategy.

 

88) Discuss integrated marketing communications.

 

89) Compare and contrast institutional advertising with advocacy advertising.

 

90) Compare and contrast advertising based on logical appeal with that based on emotional appeal.

 

91) Compare and contrast the advantages and disadvantages of newspapers as advertising media, with that of television.

 

92) Discuss the three trends that are likely to shape advertising media in the coming years.

 

93) Discuss the similarities and differences between using search engine marketing and direct response television as marketing media.

 

94) Compare and contrast personal selling with consultative selling.

 

95) What are the seven general steps in personal selling?

 

96)  Compare and contrast coupons with rebates.

 

97) Compare and contrast trade promotions with consumer promotions.

 

98) Compare and contrast viral marketing with conversation marketing.

 

99) Discuss the guidelines that companies should follow while using social media.

 

100) What is public relations?

 

 

Chapter 17   Financial Information and Accounting Concepts

 

Business in Action, 6e (Bovee/Thill)

Chapter 17   Financial Information and Accounting Concepts

 

1) Financial accounting is concerned with preparing cost analyses, profitability reports, budgets, and other information for insiders such as management and other company decision makers.

 

 

2) Bookkeeping is the clerical function of recording the economic activities of a business.

 

 

3) Financial analysis refers to combining accounting and investigating skills to assist in legal and criminal matters.

 

 

4) Controller is the highest-ranking accountant in a company.

 

5) Audit is a formal evaluation of the fairness and reliability of a client’s financial statements.

 

 

6) External auditors are independent accounting firms that provide auditing services for public companies.

 

 

7) Sarbanes-Oxley Act prohibits companies from testing their internal financial controls and processes.

 

8) Sarbanes-Oxley Act outlaws most loans by corporations to their own directors and executives.

 

9) Owners’ equity refers to the total assets of a company.

 

10) Cash basis is an accounting method in which revenue is recorded when a sale is made.

 

 

11) Depreciation is an accounting procedure used for intangible assets.

 

12) Double-entry bookkeeping is a method that requires to keep the accounting equation in balance.

 

13) Transferring net revenue and expense account balances to retained earnings for the period is referred to as closing the books.

 

 

14) Balance sheet presents a firm’s financial position on a particular date.

 

15) Fiscal year is a 12-month accounting period that begins on January 1 and ends on December 31.

 

 

16) Intellectual property and goodwill are considered liabilities in accounting.

 

17) Accounts payable is an example of a long-term liability.

 

18) Income statement is a record of a company’s total assets and liabilities.

 

 

19) Net income refers to profit earned or loss incurred by a firm.

 

20) Marketing and distributing expenses are examples of general expenses.

 

21) Statement of cash flows is a statement of a firm’s cash receipts and cash payments.

 

 

 

22) Working capital refers to the amount of cash an organization has in hand.

 

 

23) Quick ratio is a measure of a firm’s long-term liquidity.

 

 

24) Accounts receivable turnover ratio is calculated by dividing sales by the average value of accounts receivable for a period.

 

25) Leverage ratios indicate a company’s ability to pay its long-term debts.

 

 

26) Generating a(n) ________ is a function of financial accounting.

  1. A) organizational budget
  2. B) balance sheet
  3. C) cost analysis
  4. D) profitability report
  5. E) productivity analysis

 

27) Which of the following is a key difference between financial accounting and management accounting?

  1. A) Financial accounting is concerned with preparing cost analyses, whereas management accounting is concerned with creating reports.
  2. B) Financial accounting considers such aspects as profitability, whereas management accounting does not consider profitability.
  3. C) Financial accounting creates information for outsiders, whereas management accounting is for insiders.
  4. D) Management accounting is based on historical data, whereas financial accounting is based on real time data.
  5. E) Accounting knowledge is crucial to perform management accounting, whereas limited accounting knowledge is sufficient for financial accounting.

 

28) Which of the following is generated through management accounting rather than financial accounting?

  1. A) profit and loss statement
  2. B) cash flow statement
  3. C) balance sheet
  4. D) profitability reports
  5. E) statement of retained earnings

 

29) Bookkeeping refers to ________.

  1. A) the cost accounting component of accounting
  2. B) analyzing financial information
  3. C) preparing financial forecasts
  4. D) the clerical aspect of accounting
  5. E) performing profitability analysis for a company

 

 

30) AccBiz is a tool used commonly by small businesses. It is a simple application that records financial transactions. It records such transactions as sales, purchases, income, receipts, and payments. However, the software cannot be used for financial analyses or higher-level applications. The functions that AccBiz performs can be referred to as ________.

  1. A) forensic accounting
  2. B) bookkeeping
  3. C) auditing
  4. D) cost analysis
  5. E) cost accounting

 

31) Samuel works as a finance executive in a U.S.-based firm. His major task is calculating and analyzing the production and operating expenditures of the organization. The tasks that Samuel performs refer to ________.

  1. A) tax accounting
  2. B) bookkeeping
  3. C) cost accounting
  4. D) auditing
  5. E) forensic accounting

 

 

32) Which of the following refers to evaluating a company’s performance and the economic implications of strategic decisions such as product pricing, employee benefits, and business acquisitions?

  1. A) financial analysis
  2. B) tax accounting
  3. C) bookkeeping
  4. D) cost accounting
  5. E) forensic accounting

 

33) ________ refers to combining accounting and investigating skills to assist in legal and criminal matters.

  1. A) Financial analysis
  2. B) Tax accounting
  3. C) Bookkeeping
  4. D) Cost accounting
  5. E) Forensic accounting

 

34) A(n) ________ is the highest-ranking accountant in a company, responsible for overseeing all accounting functions.

  1. A) inventory manager
  2. B) controller
  3. C) treasurer
  4. D) credit manager
  5. E) cost accountant

 

 

 

35) Which of the following terms refers to a formal evaluation of the fairness and reliability of a client’s financial statements?

  1. A) cost accounting
  2. B) audit
  3. C) control
  4. D) bookkeeping
  5. E) management accounting

 

36) Public accountants are professionals who provide ________.

  1. A) accounting services to businesses and individuals for a fee
  2. B) accounting services to publically owned firms only
  3. C) financial services to not-for-profit organizations
  4. D) financial services without charging a fee for them
  5. E) financial services to people who trade in the stock market

 

37) Robert Consultants was incorporated in the year 2010. The company is now performing a formal evaluation to ensure and certify the integrity and reliability of the company’s financial statements. This formal evaluation is referred to as ________.

  1. A) cost accounting
  2. B) control
  3. C) bookkeeping
  4. D) audit
  5. E) management accounting

 

38) Independent accounting firms that provide auditing services for public companies are called ________.

  1. A) forensic auditors
  2. B) external auditors
  3. C) cost accountants
  4. D) domestic auditors
  5. E) financial analysts

 

39) Jefferson Accounting is an independent accounting firm that provides auditing services for public companies. The firm thoroughly evaluates its clients’ financial statements and certifies them. The firm is a(n) ________.

  1. A) forensic auditor
  2. B) cost accountant
  3. C) external auditor
  4. D) domestic auditor
  5. E) financial analyst

 

40) The GAAP is overseen in the United States by the ________.

  1. A) Consumer Financial Protection Agency
  2. B) Financial Management Service
  3. C) Office of Financial Stability
  4. D) Financial Accounting Standards Board
  5. E) Office of Terrorism and Financial Intelligence

 

 

41) The GAAP aims to ________.

  1. A) prohibit firms from documenting their internal financial controls and processes
  2. B) give companies the freedom to determine the salaries of its employees
  3. C) prevent firms from using internal auditors to audit operations
  4. D) enable outsiders to make confident analyses and comparisons
  5. E) provide the users with business intelligence to make informed decisions

 

42) The Sarbanes-Oxley Act outlaws ________.

  1. A) loans by corporations to their own executives
  2. B) the use of external auditors
  3. C) internal financial tests by companies
  4. D) loans obtained through pledging assets
  5. E) having financial experts in the director board

 

 

43) Jacob is the CEO of Drabo Associates, a firm that offers financial consulting to firms in the U.S. Drabo Associates gives Jacob an unguaranteed personal loan of $500,000. Which of the following legislations has outlawed such a transaction?

  1. A) Reconstruction Finance Corporation Act
  2. B) Public Utility Company Act
  3. C) Ethics in Government Act
  4. D) Sarbanes-Oxley Act
  5. E) Financial Services Modernization Act

 

44) The Public Company Accounting Reform and Investor Protection Act is informally known as the ________ Act.

  1. A) Sarbanes-Oxley
  2. B) Mann
  3. C) Cable
  4. D) Basel
  5. E) Glass-Steagall

 

45) The Sarbanes-Oxley Act requires ________.

  1. A) the board of directors to be comprised of at least fifteen members
  2. B) external auditors to provide nonaudit services also
  3. C) directors and executives to avail loans from the corporate
  4. D) companies to publicize operational budgets
  5. E) corporate lawyers to report evidence of financial wrongdoing

 

46) Identify the legislation that prohibits investment bankers from influencing stock analysts and requires CEOs and CFOs to sign statements attesting to the accuracy of their financial statements.

  1. A) Reconstruction Finance Corporation Act
  2. B) Public Utility Company Act
  3. C) Ethics in Government Act
  4. D) Sarbanes-Oxley Act
  5. E) Financial Services Modernization Act

 

47) Assets – Liabilities = ________.

  1. A) variable cost
  2. B) fixed cost
  3. C) liquidity
  4. D) business cost
  5. E) owner’s equity

 

48) A company has the following assets: (1) Fixed assets worth $30,000 and (2) investments worth $6,000. The company’s total liabilities amount to $25,000. What is the owner’s equity of the company?

  1. A) $24,000
  2. B) $36,000
  3. C) $5000
  4. D) $30,000
  5. E) $11,000

 

 

49) A company has $20,000 cash and $100,000 worth of land. Other assets of the company amount to $300,000. The firm has an outstanding loan of $200,000 and other liabilities adding up to $25,000. What is the owner’s equity of the company?

  1. A) $395,000
  2. B) $95,000
  3. C) $195,000
  4. D) $175,000
  5. E) $220,000

 

50) Which of the following is an example of company’s asset?

  1. A) inventory in the warehouse
  2. B) mortgage loans
  3. C) bonds issued by the company
  4. D) short-term loans
  5. E) debt security raised by the company

 

51) Which of the following statements is true of the double-entry bookkeeping system?

  1. A) Depreciation is not considered when recording transactions under this system.
  2. B) Only credit transactions are recorded under this system.
  3. C) The system records only those transactions that bring in revenue.
  4. D) The accounting equation is always kept in balance under the system.
  5. E) A business does not run on a cash basis under the double-entry bookkeeping system.

 

 

52) The ________ requires that expenses incurred in producing revenues be deducted from the revenue they generated during the same accounting period.

  1. A) principle of prudence
  2. B) deferral principle
  3. C) materiality principle
  4. D) matching principle
  5. E) principle of continuity

 

53) ________ is an accounting method in which revenue is recorded when a sale is made and expense is recorded when it is incurred.

  1. A) Accrual basis
  2. B) Cash basis
  3. C) Profit basis
  4. D) Depreciation
  5. E) Deferral basis

 

54) ________ is an accounting method in which revenue is recorded when payment is received and expense is recorded when money is paid.

  1. A) Accrual basis
  2. B) Profit basis
  3. C) Cash basis
  4. D) Depreciation
  5. E) Deferral basis

 

55) Charles Associates is an accounting firm that provides accounting services to many companies across the United States. The company follows an accounting system where it records revenue only when the money is actually received. Identify the accounting system that this company is using.

  1. A) depreciation
  2. B) deferral basis
  3. C) accrual basis
  4. D) profit basis
  5. E) cash basis

 

 

56) ________ is an accounting procedure for systematically spreading the cost of a tangible asset over its estimated useful life.

  1. A) Profit basis
  2. B) Accrual basis
  3. C) Cash basis
  4. D) Depreciation
  5. E) Deferral basis

 

57) Rambo Footwear is a Chinese shoe manufacturing company. The company spends a large amount to buy machinery for a new plant that it has set up. Instead of adding this in the current year’s expense the company’s accounting spreads the cost over a period of fifteen years. This accounting practice of spreading costs is called ________.

  1. A) accrual basis
  2. B) depreciation
  3. C) amortization
  4. D) cash basis
  5. E) cash balancing

 

 

58) Which of the following is a key difference between depreciation and amortization?

  1. A) Amortization is applicable for long-term assets, whereas depreciation is applicable for short-term assets.
  2. B) Depreciation applies to tangible assets, whereas amortization applies to intangible assets.
  3. C) Amortization is calculated for liabilities, whereas depreciation is calculated for assets.
  4. D) Amortization is calculated for assets, whereas depreciation is calculated for liabilities.
  5. E) Depreciation is applicable for long-term assets, whereas amortization is applicable for short-term assets.

 

59) Transferring net revenue and expense account balances to retained earnings for the period is referred to as ________.

  1. A) multiple-entry bookkeeping
  2. B) matching the account
  3. C) closing the books
  4. D) single-entry bookkeeping
  5. E) measuring current balance

 

60) You are planning to invest in a real estate firm. You want to analyze the firm’s financial strengths in terms of the overall assets and liabilities. Which of the following reports is best suited to estimate this on a particular date?

  1. A) long-term expense report
  2. B) profit and loss statement
  3. C) balance sheet
  4. D) cash flow statement
  5. E) short-term expense report

 

61) ________ is a statement of a firm’s financial position on a particular date and is known as a statement of financial position.

  1. A) Cash flow statement
  2. B) Balance sheet
  3. C) Income statement
  4. D) Expense report
  5. E) Profit and loss statement

 

62) Which of the following is an example of a current asset?

  1. A) accounts receivable
  2. B) goodwill
  3. C) land
  4. D) equipment
  5. E) intellectual property

 

 

63) Which of the following is an example of a fixed asset?

  1. A) transportation equipment
  2. B) money-market funds
  3. C) cash in hand
  4. D) accounts receivable
  5. E) short-term investments

 

 

64) Which of the following statements is true of the order in which assets are listed in the balance sheet?

  1. A) Assets such as property and plant are mentioned first in a balance sheet.
  2. B) Fixed assets are listed before current assets in a balance sheet.
  3. C) Current assets are not generally mentioned in a balance sheet.
  4. D) Assets are listed in descending order by liquidity in the balance sheet.
  5. E) Current and fixed assets are listed in no particular order in a balance sheet.

 

65) Accrued expenses are expenses that ________.

  1. A) are likely to be incurred at a future time in a different financial year
  2. B) have been incurred but for which bills have not yet been received
  3. C) are long-term liabilities that have been incurred in a financial year
  4. D) have been incurred and for which the bills have been received
  5. E) are likely to be incurred at a future time in the same financial year

 

66) Robex Woodworks is a furniture manufacturer. The company has purchased timber worth $5,000 from one of its suppliers and has not paid them yet. This amount is recorded as ________ in the balance sheet.

  1. A) accrued expense
  2. B) owners’ equity
  3. C) supplier’s equity
  4. D) accounts payable
  5. E) deferred expense

 

 

67) Which of the following expenses is classified as accounts payable?

  1. A) electricity charges
  2. B) sales commissions
  3. C) employee salaries
  4. D) interest on bonds
  5. E) loans from banks

 

68) A U.S. company issues bonds to generate money for expanding its business to China. The company generates a sum of $50,000 in this fashion. This money is an example of a(n) ________.

  1. A) short-term finance
  2. B) long-term liability
  3. C) owners’ equity
  4. D) accrued expense
  5. E) payable account

 

69) ________ is a financial record of a company’s revenues, expenses, and profits over a given period of time.

  1. A) Statement of current assets
  2. B) Income statement
  3. C) Balance sheet
  4. D) Cash flow statement
  5. E) Statement of financial position

 

70) Which of the following reports is best suited to analyze an organization’s profitability over a period of time?

  1. A) statement of financial position
  2. B) balance sheet
  3. C) cash flow statement
  4. D) income statement
  5. E) statement of current assets

 

71) The profit earned or loss incurred by a firm, determined by subtracting expenses from revenues,   is referred to as the ________.

  1. A) working capital
  2. B) current asset
  3. C) net income
  4. D) net sales
  5. E) gross income

 

 

72) Net sales – cost of goods sold = ________.

  1. A) working capital
  2. B) current asset
  3. C) gross profit
  4. D) net profit
  5. E) current liability

 

 

73) Which of the following is classified as a general expense?

  1. A) promotional expenses
  2. B) wages of salespeople
  3. C) legal fees paid
  4. D) advertising costs
  5. E) depreciation costs of showroom

 

74) Expenses incurred through marketing and distributing a product are referred to as ________ expenses.

  1. A) organization
  2. B) permanent
  3. C) general
  4. D) selling
  5. E) administration

 

75) A firm has $30,000 cash and other current assets amount to $55,000. Total amount of current liabilities add up to $50,000. Calculate the total working capital of this firm.

  1. A) $20,000
  2. B) $5,000
  3. C) $30,000
  4. D) $85,000
  5. E) $35,000

 

 

76) ________ ratio is calculated by dividing current assets by current liabilities.

  1. A) Debt-to-equity
  2. B) Current
  3. C) Quick
  4. D) Acid-test
  5. E) Inventory turnover

 

77) Which of the following ratios is used to measure a firm’s short-term liquidity?

  1. A) accounts receivable turnover ratio
  2. B) inventory turnover ratio
  3. C) quick ratio
  4. D) debt-to-equity ratio
  5. E) equity-to-debt ratio

 

and stages of financial management for companies

Classification:  Concept

78) Which of the following is an example of an activity ratio?

  1. A) inventory turnover ratio
  2. B) acid-test ratio
  3. C) debt-to-equity ratio
  4. D) current ratio
  5. E) debt-to-assets ratio

 

79) Activity ratios analyze ________.

  1. A) how well a company is making use of its assets
  2. B) a firm’s ability to pay its short-term obligations
  3. C) a firm’s ability to pay its long-term obligations
  4. D) the leverage status of a company in question
  5. E) the extent to which a business is financed by debt

 

80) A firm’s current liabilities amount to $30,000. It does not have any marketable securities and receivables amount to $20,000. Calculate the acid-test ratio of the firm if it has $40,000 cash in hand.

  1. A) 2.0
  2. B) 0.5
  3. C) 1.0
  4. D) 1.67
  5. E) 1.5

 

 

81) A reduction in a manufacturer’s inventory turnover ratio is likely to indicate that the ________.

  1. A) market growth has been very high
  2. B) sales are slowing down
  3. C) forecasting has been accurate
  4. D) company is in a strong financial position
  5. E) company has long-term debt obligations

 

82) Which of the following is a leverage ratio?

  1. A) inventory turnover ratio
  2. B) debt-to-equity ratio
  3. C) current ratio
  4. D) acid-test ratio
  5. E) accounts receivable turnover ratio

 

83) Leverage ratios indicate ________.

  1. A) how well a company is making use of its assets
  2. B) a firm’s ability to pay its short-term debts
  3. C) how well a company is making use of its investments
  4. D) a firm’s ability to pay its long-term obligations
  5. E) a firm’s ability to meet short-term obligations

 

 

84) Total liabilities divided by total assets will yield the ________ ratio.

  1. A) debt-to-equity ratio
  2. B) current ratio
  3. C) acid-test ratio
  4. D) asset turnover ratio
  5. E) debt-to-assets ratio

 

85) Compare and contrast management accounting with financial accounting.

 

86) Explain how private accountants function.

 

87) Compare and contrast public accountants and private accountants.

 

88) What is GAAP?

 

90) Describe the major provisions of the Sarbanes-Oxley Act.

 

91) Describe double-entry bookkeeping and the matching principle.

 

 

92) Compare and contrast accrual basis accounting and cash basis accounting.

 

93) What is a balance sheet? Why is it called a balance sheet?

 

94) Explain the significance of the income statement of a business.

 

95) Describe cost of goods sold and operating expenses.

 

96) Briefly explain trend analysis.

 

97) Compare and contrast quick ratio and current ratio. Which one do you think is more accurate?

 

98) Compare and contrast different types of financial ratios.

 

99) Select a manufacturing industry of your choice. Conduct a ratio analysis of three major firms in the industry to determine and compare the activity ratios in the industry. Analyze the results that you have calculated.

 

100) Obtain the financial statements of a public company of your choice. Conduct a ratio analysis to determine the leverage ratios of the company. Comment on the company’s growth

 

 

Chapter 18   Financial Management

 

Business in Action, 6e (Bovee/Thill)

Chapter 18   Financial Management

 

1) Financial decisions with high perceived risk will have low potential for rewards.

 

 

2) Highly leveraged companies will have adequate funds to spend on advertising, staffing, and product development.

 

 

3) A financial plan outlines the funds needed for a certain period of time.

 

 

4) Revenue obtained through selling assets is an example of an external source of income.

 

5) Accounts receivable refers to the money owed to a firm by its customers.

 

 

6) Inventory represents a cost while it is waiting to be sold.

 

 

7) Budget reflects expected revenues, cash receipts, and outlays.

 

 

8) Hedging refers to selling a product at a higher rate than what was determined.

 

9) Rolling forecasts are not based on revenue budgets and cost assumptions.

 

 

10) An operational budget outlines expenditures for real estate, new facilities, and major equipments.

 

11) Equity financing refers to arranging funding by selling ownership shares in the company.

 

12) Short-term financing is financing that will be repaid within one year.

 

13) Shareholders of a firm have prior claims on the firm’s assets.

 

 

14) Cost of capital is the average rate of interest a firm pays on its combination of debt and equity.

 

 

15) Leverage is the technique of increasing the rate of return on an investment by financing it with borrowed funds.

 

16) Secured loans are backed up with assets that the lender can claim in case of default.

 

17) Commercial paper is an arrangement in which a financial institution makes money available for use at any time after the loan has been approved.

 

 

18) Factoring refers to lending a lump sum of cash via a promissory note or on-demand access without accepting any other securities.

 

 

19) Term loans have maturities between three months to one year.

 

 

20) Long-term loans on real estate are called mortgages.

 

21) Lease is an agreement to use an asset in exchange for regular payment.

 

 

22) Debentures are backed by specific assets that will be given to bondholders if the borrowed amount is not repaid.

 

 

23) Venture capital is an example of private equity.

 

 

24) Venture capital is one of the least specialized and most widely available forms of funding.

 

25) Underwriter is a specialized type of bank that buys the shares from the company preparing an IPO and sells them to investors.

 

26) Which of the following is an internal source for obtaining funds for business?

  1. A) issuing corporate bonds
  2. B) unsecured loans
  3. C) factoring
  4. D) commercial papers
  5. E) selling assets to obtain revenue

 

 

27) Which of the following is the best example of an external source for obtaining funds for business?

  1. A) revenue from selling assets
  2. B) funds from shareholders
  3. C) interest from deposits
  4. D) issuing corporate bonds
  5. E) earnings from investments

 

28) Accounts receivable refers to ________.

  1. A) the total of owner’s funds invested in a business
  2. B) the total annual revenue of a company
  3. C) amounts that a firm owes to other parties
  4. D) the money owed to a firm by its customers
  5. E) the total interest payments made by the firm

 

29) Doron is a manufacturer of plastic products. The company produces utensils and gift items. Which of the following would appear as accounts payable in the company’s balance sheet?

  1. A) revenue obtained by selling assets to a supplier
  2. B) funds obtained through issuing corporate bonds
  3. C) a default payment made on a long-term loan
  4. D) funds obtained through issuing preference shares
  5. E) a bill that one of the suppliers has sent for a purchase

 

 

30) Which of the following is a component of a firm’s working capital account?

  1. A) long-term loans
  2. B) debentures
  3. C) inventory
  4. D) mortgage bonds
  5. E) convertible bonds

 

31) ________ accounts represent a firm’s cash on hand as well as economic value that can be converted to cash or is expected from customers, minus what it is scheduled to pay out.

  1. A) Capital budget
  2. B) Trade credit
  3. C) Project budget
  4. D) Working capital
  5. E) Operating budget

 

32) A company keeps $150,000 cash reserve to meet day-to-day expenses. The cash reserve is centralized and various branches can access money from the reserve to meet every-day expenses. This cash reserve is part of the company’s ________ account.

  1. A) trade credit
  2. B) project budget
  3. C) fixed budget
  4. D) working capital
  5. E) capital budget

 

33) Which of the following statements is true of a company’s inventory?

  1. A) It is an example of a long-term asset that companies hold.
  2. B) It is the most liquid current asset of a company.
  3. C) It has the potential to be converted to cash.
  4. D) It is classified under accounts receivable.
  5. E) It is not associated with costs when it is waiting to be sold.

 

 

34) A ________ is a planning and control tool that reflects expected revenues, operating expenses, and cash receipts and outlays.

  1. A) data structure
  2. B) financial plan
  3. C) cash flow
  4. D) budget
  5. E) capital structure

 

35) Hedging refers to forming contracts that allow a company to ________.

  1. A) obtain funds for a short period without paying interest
  2. B) buy supplies in the future at designated prices
  3. C) finance long-term debt on a continuous basis
  4. D) engage in buyer-seller relationships with many firms
  5. E) issue letters of credit to buyers exterior to the home country

 

 

36) USS Agro is a firm that markets agricultural products. The firm procures supplies from agricultural cooperatives across the world. The firm forms agreements with the cooperatives to provide supplies at a fixed price in the future to protect them against changing prices. This is an example of ________.

  1. A) zero-based budgeting
  2. B) inventorying
  3. C) liquidation
  4. D) hedging
  5. E) standardization

 

 

37) When using ________, a company starts the year with a budget based on revenue and cost assumptions made at that point but then reviews economic performance every month or every quarter to see whether the budget needs to be modified as the year progresses.

  1. A) hedge-based budgeting
  2. B) scenario planning
  3. C) rolling forecasts
  4. D) product segmentation
  5. E) judgmental forecasting

 

38) ________ budget identifies the money a new company will need to spend to launch operations.

  1. A) Master
  2. B) Start-up
  3. C) Capital
  4. D) Project
  5. E) Operating

 

 

39) ________ refers to the rate at which the company is using up the funds from its initial investors.

  1. A) Capital ratio
  2. B) Order rate
  3. C) Hedge rate
  4. D) Burn rate
  5. E) Current ratio

 

40) Burn rate is a major concern when preparing a(n) ________ budget.

  1. A) start-up
  2. B) operating
  3. C) capital
  4. D) project
  5. E) master

 

41) ________ budget identifies all sources of revenue and coordinates the spending of those funds throughout the coming year. It is also known as the master budget.

  1. A) Launch
  2. B) Start-up
  3. C) Capital
  4. D) Project
  5. E) Operating

 

 

42) Albert is the financial manager of a manufacturing firm. Albert has been an integral part of the firm ever since it started business in 2006. Albert’s job has transformed over the years and every year he is responsible for creating a budget to identify all sources of raising funds and coordinates the spending of those funds throughout the company. This budget is an example of a(n) ________ budget.

  1. A) start-up
  2. B) capital
  3. C) launch
  4. D) project
  5. E) operating

 

43) ________ budget is a budget that outlines expenditures for real estate, new facilities, major equipment, and other such investments.

  1. A) Operating
  2. B) Project
  3. C) Master
  4. D) Capital
  5. E) Start-up

 

 

44) Forter Consultants is a firm that provides cloud computing and remote storage services to firms in the United States. The company plans to buy more servers to increase its operating and storing capacity. It also creates a budget for the purchase and it estimates the total cost to be about $3 million. The budget created for this transaction is an example of a(n) ________ budget.

  1. A) operating
  2. B) project
  3. C) master
  4. D) launch
  5. E) capital

 

45) ________ budget identifies the costs needed to accomplish a particular assignment.

  1. A) Operating
  2. B) Project
  3. C) Master
  4. D) Capital
  5. E) Start-up

 

46) 4Learning is a firm that sells learning solutions to customers. The company identifies the training needs of organizations and designs flash-based online training programs for them. The company has recently received an order to create product training platforms for an electronic manufacturer. The company creates a budget specifically for this order to determine the pricing of the project. This budget is an example of a ________ budget.

  1. A) operating
  2. B) capital
  3. C) project
  4. D) master
  5. E) start-up

 

47) Equity financing refers to arranging funding by ________.

  1. A) borrowing money from institutions
  2. B) selling corporate bonds
  3. C) selling shares ownership
  4. D) issuing commercial papers
  5. E) borrowing money from individuals

 

 

48) Short-term financing is financing that will typically be repaid within ________.

  1. A) one year
  2. B) two years
  3. C) three years
  4. D) five years
  5. E) ten years

 

49) Short-term financing is used to cover ________ of a business.

  1. A) current expenses
  2. B) start-up costs
  3. C) launch costs
  4. D) fixed costs
  5. E) capital expenses

 

50) Duromart is an American multinational retailer corporation that runs chains of large discount department stores and warehouse stores. Which of the following actions of Duromart is an example of availing short-term credit?

  1. A) The company issues bonds with a face value of $10 to raise money.
  2. B) The company issues debentures that offer 8 percent interest.
  3. C) The company pledges its assets to obtain a mortgage loan.
  4. D) The company opens a trade credit account with a major bank.
  5. E) The company leases a plot of land that it owns to raise money.

 

51) Which of the following is a major difference between debt financing and equity financing?

  1. A) Equity financing has a specific maturity period, whereas debt financing usually has no specific maturity period.
  2. B) Debt financing is not linked to organizational performance, unlike equity financing.
  3. C) Equity holders have primary claims on assets unlike debt financiers.
  4. D) Payments to equity holders reduce taxable income, whereas debt payments are not tax deductible.
  5. E) Debt financing is used to cover long term expenses, whereas equity financing is used for current expenses.

 

52) ________ is the average rate of interest a firm pays on its combination of debt and equity.

  1. A) Economic surplus
  2. B) Marginal cost
  3. C) Working capital
  4. D) Cost of capital
  5. E) Economic deficit

 

53) Boston Ceramics is a manufacturer of semiconductors. The company produces such parts as ceramic machine components. The company wants to raise $ 15 million to launch operations in a new country. The company decides to fund the launch entirely by using debt financing. Which of the following observations, if true, would most strengthen this financing decision?

  1. A) Research has revealed that the company has high chance of succeeding in the new market.
  2. B) The company is looking to obtain funding that does not have a specific maturity period.
  3. C) The management feels that the new project is a very risky affair.
  4. D) The management wants to establish discretionary costs for the new project.
  5. E) Tax rates are high in the new market and the company wants to minimize taxable income.

 

54) Financing would cost more if ________.

  1. A) opportunity cost is low for the financier
  2. B) investors lend less money
  3. C) funding is for long-term
  4. D) perceived risk is less
  5. E) a company is financially solid

 

 

55) Prime interest rate is the ________.

  1. A) lowest rate of interest that banks charge for short-term loans
  2. B) average rate of interest charged by banks on their customers
  3. C) interest rate that the Federal Reserve charges on loans
  4. D) interest that the Federal Reserve pays for deposits
  5. E) interest rate banks charge to their least creditworthy customers

 

56) Roder Industries is a multinational production firm. Invo Bank is the firm’s major financier in the United States. The bank offers short-term loans to Roder at a very low rate and the bank considers Roder to be its best customer. The interest rate the Invo bank charges on these short-term loans are called ________ interest rate.

  1. A) risk-based
  2. B) deferred
  3. C) prime
  4. D) federal
  5. E) inflationary

 

 

57) ________ is the technique of increasing the rate of return on an investment by financing it with borrowed funds.

  1. A) Returns projection
  2. B) Budgeting
  3. C) Leverage
  4. D) Forecasting
  5. E) Financial projection

 

58) Capital structure is ________.

  1. A) the original monetary value of an economic item
  2. B) a statement of the financial position of a company
  3. C) the summary of the financial balances of a business
  4. D) a firm’s mix of debt and equity financing
  5. E) a combination of operational expenses and capital expenses

 

59) Which of the following sources of short-term debt is characterized by revolving credit terms?

  1. A) unsecured loan
  2. B) secured loan
  3. C) trade credit
  4. D) credit card
  5. E) commercial paper

 

 

60) ________ refers to short-term promissory notes, or contractual agreements, to repay a borrowed amount by a specified time with a specified interest rate.

  1. A) Corporate bond
  2. B) Factoring
  3. C) Trade credit
  4. D) Lease agreement
  5. E) Commercial paper

 

61) ________ is an arrangement in which a financial institution makes money available for use at any time after the loan has been approved.

  1. A) Corporate bond
  2. B) Factoring
  3. C) Line of credit
  4. D) Lease agreement
  5. E) Commercial paper

 

62) ________ is an arrangement in which a financial institution makes money available for use at any time after the loan has been approved.

  1. A) Leasing agreement
  2. B) Credit card
  3. C) Secured loan
  4. D) Line of credit
  5. E) Commercial paper

 

63) A company sells its accounts receivable to an intermediary. The intermediary collects the receivables from the customer. This is an example of ________.

  1. A) an unsecured loan
  2. B) factoring
  3. C) trade credit
  4. D) a secured loan
  5. E) a commercial paper

 

 

64) RS Bank provides short-term loans to small businesses. Many of the bank’s customers take months to pay their bills. The bank often buys the companies’ accounts receivable and pays them in return. This is an example of ________.

  1. A) an unsecured loan
  2. B) trade credit
  3. C) a secured loan
  4. D) factoring
  5. E) a commercial paper

 

65) Compensating balance refers to the portion of an unsecured loan that ________.

  1. A) is kept on deposit at a lending institution
  2. B) has already been paid by the borrower
  3. C) has not been paid by the borrower
  4. D) is charged by the lender as interest
  5. E) is not supported by any collateral securities

 

 

66) Frost Bank lends $500,000 to Arbex Manufacturer. Arbex has agreed to pay this amount back in fifty equal installments over a period of ten years. This is an example of a ________.

  1. A) lease agreement
  2. B) trade credit
  3. C) corporate bond
  4. D) long-term loan
  5. E) commercial paper

 

 

67) Which of the following is a disadvantage of long-term loans?

  1. A) They cannot provide substantial sums of money to businesses.
  2. B) They require diluting ownership in organizations.
  3. C) They are available to firms with a weak credit rating.
  4. D) Such loans can restrict the way an organization uses its assets.
  5. E) Not all companies can qualify for loans and acceptable terms.

 

68) Which of the following is a source of long-term debt financing?

  1. A) corporate bond
  2. B) trade credit
  3. C) credit card
  4. D) factoring
  5. E) commercial paper

 

 

69) ________ is an agreement to use an asset in exchange for regular payment.

  1. A) Credit card
  2. B) Lease
  3. C) Mortgage
  4. D) Trade credit
  5. E) Commercial paper

 

 

70) ________ are unsecured bonds, backed only by the corporation’s promise to pay.

  1. A) Convertible bonds
  2. B) Protected bonds
  3. C) Bills of exchange
  4. D) Debentures
  5. E) Non-convertible bonds

 

71) Gordon Glass is a large manufacturer of glass products. The company’s product range includes glass vessels, car glasses, mirrors and so forth. In order to raise money to open a new plant in Alaska, the company issues corporate bonds. The bonds are unsecured, but include the corporation’s promise to pay an interest of 12 percent. The tenure of the bond is five years and neither party can change the maturity date. These bonds are examples of ________.

  1. A) redeemable bonds
  2. B) callable bonds
  3. C) debentures
  4. D) mortgaged bonds
  5. E) collateralized bonds

 

 

72) Rex Associates has a poor credit rating and is finding it difficult to obtain loans. In order to fund a new project, the company decides to let out one of its buildings to a bank. The company obtains funds in return from the bank. This is an example of ________.

  1. A) unsecured lending
  2. B) factoring
  3. C) leasing
  4. D) long-term lending
  5. E) short-term lending

 

73) ________ can be exchanged at the investor’s option for a certain number of shares of the corporation’s common stock.

  1. A) Collateralized bonds
  2. B) Protected bonds
  3. C) Bills of exchange
  4. D) Debentures
  5. E) Convertible bonds

 

74) Incobar Steel is a large manufacturer of steel. The company decides to issue bonds to raise money to expand its operations. The final maturity term of the bonds is three years, but a portion of the outstanding bonds matures once in every six months. The bonds are backed only by the corporation’s promise to pay. The bonds that Incobar Steel is issuing are best referred to as ________ bonds.

  1. A) mortgage
  2. B) callable
  3. C) term
  4. D) secured
  5. E) serial

 

75) Term bonds are bonds that ________.

  1. A) mature all at the same time
  2. B) can be paid off when needed
  3. C) mature four times a year
  4. D) mature at various times
  5. E) are backed by company-owned property

 

76) With most bond issues, a corporation retains the right to pay off the bonds before maturity. Such bonds are called ________.

  1. A) secured bonds
  2. B) fixed bonds
  3. C) debentures
  4. D) callable bonds
  5. E) convertible bonds

 

77) Which of the following is a major advantage of raising funds through selling shares of ownership?

  1. A) Selling shares to the public makes the company’s operations less complicated.
  2. B) It does not change the way a company is managed.
  3. C) It consumes less time than other forms of financing.
  4. D) It has tremendous potential to fuel organizational growth.
  5. E) Owners do not risk their position in the firm when selling shares.

 

 

78) ________ is a specialized type of bank that buys the shares from the company preparing an IPO and sells them to investors.

  1. A) Financial adviser
  2. B) Underwriter
  3. C) Controller
  4. D) Treasurer
  5. E) Financial renovator

 

79) DS Bank is a bank specialized in buying shares of ownership from firms that want to sell it to investors. The bank sells the shares to investors on the company’s behalf. DS Bank is a(n) ________.

  1. A) financial renovator
  2. B) controller
  3. C) treasurer
  4. D) underwriter
  5. E) non-banking firm

 

 

80) Before a company can sell shares to the public in the United States, it must ________.

  1. A) generate a profit of $1 billion
  2. B) have a turnover of $1 billion
  3. C) register with the SEC
  4. D) have fifty or more shareholders
  5. E) have a hundred or more shareholders

 

81) Private equity refers to ________.

  1. A) shares that are owned by institutions rather than individuals
  2. B) ownership assets that aren’t publicly traded
  3. C) preference shares issued by a corporation
  4. D) shares that are traded in stock exchanges
  5. E) shares that are owned by individuals rather than institutions

 

82) Preparing a public offering involves ________.

  1. A) issuing corporate bonds to the employees of the firm
  2. B) hiring a public accounting firm to serve as auditor
  3. C) hiring a private company as a proxy firm
  4. D) raising $1 million as a security deposit to the SEC
  5. E) engaging in collective bargaining with the employees

 

 

83) Which of the following is a valid observation of venture capital?

  1. A) Venture Capital counts on getting very high returns from a few winners.
  2. B) Venture is a specialized form of public equity.
  3. C) Venture capital is the most common type of funding in the United States.
  4. D) Venture capital is one of the least specialized forms of funding.
  5. E) Venture capital is one of the most widely available forms of funding.

 

84) ________ is an SEC-required document that discloses required information about the company, its finances, and its plans for using the money it hopes to raise.

  1. A) Memorandum of agreement
  2. B) Chairperson’s report
  3. C) Prospectus
  4. D) Articles of association
  5. E) Memorandum of association

 

85) The purpose of issuing a prospectus during a public stock offering is to ________.

  1. A) validate the corporate bonds issued by them
  2. B) provide information to the underwriters
  3. C) disclose information to the SEC
  4. D) create opportunities for debt financing
  5. E) obtain short-term financing from institutions

 

 

86) Explain the concept of risk/return trade-off.

 

87) A company decides to remain highly leveraged to minimize the ownership shares. Critically analyze this approach.

 

88) Dulbor is a manufacturer of automobile tires. The company requires such raw materials as natural rubber, activators, and other chemicals. Total fund available to the company in the current financial year is $500,000. Construct a financial plan for Dulbor. Make the necessary assumptions.

 

89) Explain why companies form hedging agreements with their suppliers.

 

90) Compare and contrast various types of budgets.

 

91) A group of six entrepreneurs are starting a paper manufacturing unit. The owners have contributed $ 20,000 and have availed a long-term loan of $15,000. Use zero-based budgeting to create a launch budget for this firm. Make necessary assumptions and list all the assumptions that you are making.

 

 

92) Choose an operational unit of your unit (for example, the marketing department in a firm) and construct an operating budget for the unit. Make necessary assumptions and list all the assumptions that you are making.

 

93) Compare and contrast debt financing and equity financing.

 

94) Explain the importance of considering interest fluctuations in financial planning.

 

95) Compare and contrast credit cards and trade credit.

 

96) Compare and contrast secured loans and unsecured loans.

 

97) Explain why businesses use factoring to raise funds.

 

 

98) Gordon Consultants is planning to raise money by leasing a building that it owns. What do you think are the components of a lease agreement? Draft a lease agreement for Gordon Consultants.

 

99) Compare and contrast secured bonds and debentures.

 

100) Explain the concept of venture capital.

 

 

Chapter 19   Financial Markets and Investment Strategies

 

Business in Action, 6e (Bovee/Thill)

Chapter 19   Financial Markets and Investment Strategies

 

1) Preferred stock appreciates in value much faster than common stock.

 

 

2) Preferred stock owners have no voting rights in a corporation.

 

 

3) The value assigned to each share of stock when it is first issued is known as its book value.

 

 

4) Stock of companies whose earnings tend to track the ups and downs of the economy in a predictable pattern are known as defensive stocks.

 

5) Albert buys the stock of an established corporation, mainly to obtain good dividends. However, the corporation’s growth is limited. This stock is an example of a defensive stock.

 

 

6) A company’s price/earnings ratio is determined by dividing the market value per share by the earnings per share.

 

 

7) A stock split is performed if a company’s management team believes that the firm’s shares are undervalued.

 

 

8) The amount of money or principle that the purchaser of a bond lends to the bond issuer is known as its coupon.

 

9) Maturity date is the date on which the principle of a bond will be repaid in full.

 

10) Investing in bonds typically has higher risk than investing in stocks.

 

 

11) With a zero-coupon bond the purchaser buys the bond at a discount from the face value.

 

 

12) Treasury notes are debt securities issued by the federal government that are repaid within 1 to 10 years after issuance.

 

13) Treasury bills are sold at a discount and redeemed at face value.

 

 

14) Treasury bonds are short-term debt securities issued by the federal government that are repaid within a year.

 

15) Money-market funds are financial instruments that invest in stocks considered to be selling below their true value.

 

 

16) Balanced funds refer to funds that invest in a combination of stocks and bonds.

 

17) Funds that invest in foreign and U.S. securities are called international funds.

 

 

18) Derivatives are contracts whose value is derived from some other entity.

 

 

19) An investor buys a right and obligation when he or she buys an option.

 

20) Suppliers use future contracts to protect themselves from future price decreases.

 

 

21) The loans themselves are not transferred when a credit default swap is performed.

 

22) A stock exchange is an organization that buys and sells securities on behalf of individual and institutional investors.

 

 

23) Most trading in the bond market occurs over the counter and takes place outside organized exchanges.

 

 

24) Bear market is a market situation in which most stocks are increasing in value.

 

25) Stop order is an order to sell a stock when its price falls to a particular point.

 

26) ________ refers to shares of ownership without voting rights but with defined dividends.

  1. A) Treasury bond
  2. B) Preferred stock
  3. C) Derivative
  4. D) Equity stock
  5. E) Common stock

 

 

 

27) Josephine would like to invest part of her Individual Retirement Account (IRA) in the stock market, but she wants to minimize the risk as much as possible. Which of the following is the most suitable investment alternative for Josephine?

  1. A) financial futures
  2. B) derivatives
  3. C) options
  4. D) preferred stock
  5. E) commodities futures

 

28) Stocks of major, well-established corporations with demonstrated ability to manage their way through every kind of economic condition are known as ________ stocks.

  1. A) blue chip
  2. B) income
  3. C) growth
  4. D) penny
  5. E) cyclical

 

 

29) Stocks that are purchased primarily for dividend payouts rather than capital gains potential are known as ________ stocks.

  1. A) blue chip
  2. B) growth
  3. C) income
  4. D) penny
  5. E) defensive

 

30) Riban Industries is a manufacturer of watches. The company’s profits are predictable and the stock yields huge dividends, although the prospects for growth are low. Riban Industries is an example of a(n) ________ stock.

  1. A) blue chip
  2. B) income
  3. C) cyclical
  4. D) penny
  5. E) defensive

 

31) Jackson Associates is a firm that owns many stationary stores across the United States. The company’s stock performance is highly linked to the overall performance of the stock market. The company’s stock performs well when the economy and the stock market perform well and vice-versa. Jackson Associates is an example of a(n) ________ stock.

  1. A) blue chip
  2. B) penny
  3. C) defensive
  4. D) income
  5. E) cyclical

 

32) Stocks that sell for less than one dollar per share or stocks that are highly speculative are called ________ stocks.

  1. A) penny
  2. B) income
  3. C) defensive
  4. D) cyclical
  5. E) mid cap

 

33) ________ stocks tend to fare better when the economy is doing worse and vice versa.

  1. A) Blue chip
  2. B) Income
  3. C) Penny
  4. D) Cyclical
  5. E) Defensive

 

34) The price at which the stock is actually selling is referred to as its ________ value.

  1. A) face
  2. B) par
  3. C) book
  4. D) intrinsic
  5. E) market

 

 

35) ________ value is an estimate of what a company is actually worth, independent of other values.

  1. A) Intrinsic
  2. B) Face
  3. C) Par
  4. D) Book
  5. E) Market

 

36) ________ ratio is calculated by dividing the market value per share by the earnings per share.

  1. A) Return on capital
  2. B) Price/earnings
  3. C) Sales/income
  4. D) Gross value
  5. E) Gross margin

 

37) Companies attempt to increase the market valuation of a share by ________.

  1. A) repurchasing some of the shares through a stock buyback
  2. B) maintaining a lower than average price/earnings ratio
  3. C) announcing a stock split of its shares
  4. D) dividing the shares into multiple shares
  5. E) reducing the percentage of dividend being paid out to investors

 

 

38) In your portfolio, you own 450 shares of General Electric. The company announces that each share of stock is being divided into three new shares, so you now own 1,350 shares. This is known as a stock ________.

  1. A) option
  2. B) buyback
  3. C) valuation
  4. D) dilution
  5. E) split

 

39) The amount of money that the bond buyer is lending to the bond issuer is known as the ________.

  1. A) par value
  2. B) yield
  3. C) dividend
  4. D) coupon rate
  5. E) intrinsic value

 

 

40) The annual interest rate that an issuer offers when a bond is first sold is known as the ________.

  1. A) current yield
  2. B) coupon
  3. C) market yield
  4. D) par value
  5. E) market value

 

41) Maturity date is the date on which ________.

  1. A) interest will be paid every month to a bond’s investors
  2. B) interest will be paid every year to a bond’s investors
  3. C) a bond will be converted to a common stock
  4. D) the principle of a bond will be repaid in full
  5. E) an installment of interest will be paid to investors of bonds

 

42) A bond’s face value is $2000. Its coupon is 9 percent. The bond’s present market value is $1800. What is the current yield of the bond?

  1. A) 12 percent
  2. B) 6 percent
  3. C) 9 percent
  4. D) 8.1 percent
  5. E) 10 percent

 

 

43) Annual interest/closing price = ________.

  1. A) current yield
  2. B) maturity
  3. C) coupon
  4. D) par value
  5. E) face value

 

44) With a zero-coupon bond, the ________.

  1. A) purchaser buys the bond at a discount from the face value
  2. B) full face value is not paid to the investor at maturity
  3. C) investor receives interest on a regular basis
  4. D) interest is paid immediately after a bond is purchased
  5. E) purchaser buys a bond by paying exactly the face value

 

45) A call provision allows the issuer to ________.

  1. A) reduce the interest rate of the bond
  2. B) change the face value of the bond
  3. C) repurchase the bond before maturity
  4. D) downgrade the status of the bond
  5. E) change the coupon rate of the bond

 

 

46) ________ refer to short-term debt securities issued by the federal government.

  1. A) Municipal bonds
  2. B) Treasury bills
  3. C) TIPS
  4. D) Treasury notes
  5. E) Treasury bonds

 

47) ________ refer to debt securities issued by the federal government that are repaid within 1 to 10 years after issuance.

  1. A) Municipal bonds
  2. B) Treasury bills
  3. C) Treasury bonds
  4. D) TIPS
  5. E) Treasury notes

 

48) ________ refer to debt securities issued by the federal government that are repaid more than 10 years after issuance.

  1. A) Treasury bonds
  2. B) TIPS
  3. C) Treasury notes
  4. D) Municipal bonds
  5. E) Treasury bills

 

49) ________ refer to treasury issues in which the principle amount is tied to the Consumer Price Index to protect the buyer against the effects of inflation.

  1. A) Treasury notes
  2. B) Treasury bills
  3. C) Treasury bonds
  4. D) TIPS
  5. E) Municipal bonds

 

 

50) Bonds issued by states, cities, and various government agencies to fund public projects are known as ________.

  1. A) treasury bonds
  2. B) treasury bills
  3. C) TIPS
  4. D) treasury notes
  5. E) municipal bonds

 

51) Portfolio diversification is performed to ________.

  1. A) protect against significant declines in any one vehicle
  2. B) maximize the returns from any one vehicle
  3. C) reduce the load that intermediaries charge
  4. D) maximize the earning potential of a portfolio
  5. E) maximize the earning potential of an investment vehicle

 

 

52) Norbon Securities is a financial intermediary. The firm facilitates the sale of mutual funds and charges commission when selling mutual funds to investors. This commission is referred to as ________.

  1. A) bill
  2. B) index
  3. C) load
  4. D) yield
  5. E) coupon

 

 

53) No-load funds are mutual funds that ________.

  1. A) do not charge sales commission
  2. B) offer high rates of interest
  3. C) offer low rates of interest
  4. D) do not invest in equity shares
  5. E) offer huge tax benefits to investors

 

54) Funds that invest in a combination of stocks and bonds are called ________ funds.

  1. A) specialized
  2. B) sector
  3. C) restricted
  4. D) balanced
  5. E) socially responsible

 

 

55) Dobex Investing is a fund management company. Most of the firm’s funds are invested in a wide mixture of stocks and bonds. Such funds are called ________ funds.

  1. A) balanced
  2. B) sector
  3. C) restricted
  4. D) specialized
  5. E) socially responsible

 

 

56) RS Bank introduces a mutual fund that is designed to invest only in the telecom sector. This mutual fund is an example of a(n) ________.

  1. A) target-date fund
  2. B) sector fund
  3. C) optimal fund
  4. D) balanced fund
  5. E) socially responsible fund

 

57) ________ funds attempt to maintain a desirable balance of risk and growth potential based on a planned retirement date.

  1. A) Balanced
  2. B) Sector
  3. C) International
  4. D) Speciality
  5. E) Target-date

 

 

58) Global funds are funds that ________.

  1. A) invest in U.S. securities from foreign countries
  2. B) invest in special sectors or industries
  3. C) invest in foreign and U.S. securities
  4. D) invest strictly in foreign securities
  5. E) make investment choices based on social responsibility

 

 

59) You invest $6,000 in a no-load mutual fund whose net asset value per share is $36. How many shares of the mutual fund will you receive if the coupon is 8 percent?

  1. A) 4.92
  2. B) 166.66
  3. C) 750
  4. D) 288
  5. E) 20.83

 

60) Mutual fund’s assets – its liabilities = ________.

  1. A) net asset value
  2. B) face value
  3. C) par value
  4. D) load value
  5. E) market value

 

 

61) ________ are contracts whose value is derived from some other entity.

  1. A) Preference shares
  2. B) Derivatives
  3. C) Equities
  4. D) Secured bonds
  5. E) Unsecured bonds

 

 

62) Which of the following is the basic premise of a derivative?

  1. A) limiting the value of an asset attached to them
  2. B) transferring risk from one party to another
  3. C) linking shares to governmental bonds
  4. D) minimizing the risk for all parties involved
  5. E) maximizing the dividend payout on equities

 

63) A(n) ________ is the purchased right, but not the obligation, to buy or sell a specified number of shares of a stock or other security at a predetermined price during a specified period.

  1. A) credit derivative
  2. B) secured bond
  3. C) option
  4. D) financial future
  5. E) commodity future

 

64) Which of the following is an example of a call option?

  1. A) a purchased right that gives the right to buy a stock at a fixed price until an expiration date
  2. B) a contract to buy amounts of specified currency at some future date
  3. C) a contract to sell a foreign currency for a set price without an expiry date
  4. D) a contract to sell a treasury bond for a set price without an expiry date
  5. E) a purchased right that gives the right to sell the stock at a fixed price until the expiration date

 

 

65) A put option is purchased when the buyer believes that the ________.

  1. A) price of underlying stock will have no effect on options
  2. B) price of underlying stock will decrease
  3. C) option will not be profitable
  4. D) price of underlying stock will increase
  5. E) price of underlying stock will remain constant

 

66) A(n) ________ is a contract to buy or sell a financial instrument for a set price at a later date.

  1. A) financial future
  2. B) put option
  3. C) credit derivative
  4. D) call option
  5. E) commodities future

 

 

67) Robex Retail forms a contract with one of its suppliers to buy specific amounts of agricultural produce at a later date. This contract is an example of a(n) ________.

  1. A) financial future
  2. B) put option
  3. C) credit derivative
  4. D) call option
  5. E) commodities future

 

 

68) Currency futures are used to ________.

  1. A) reduce a lender’s exposure to credit risk
  2. B) buy commodities at a fixed price
  3. C) avoid obligations to buy or sell assets
  4. D) hedge against exchange rate shifts
  5. E) reduce a borrower’s exposure to credit risk

 

69) Credit derivatives are derivatives used to ________.

  1. A) reduce a lender’s exposure to risk
  2. B) link liabilities to a federal agency
  3. C) hedge against exchange rate shifts
  4. D) link assets to a federal agency
  5. E) avoid obligations to buy or sell assets

 

 

70) Stock exchanges are organizations that ________.

  1. A) issue cash in exchange for pledging stock
  2. B) function as underwriters in public issues
  3. C) facilitate the buying and selling of stock
  4. D) issue stock on behalf of small companies
  5. E) combine multiple stocks to create mutual funds

 

 

71) JSE Limited is a South African organization that facilitates exchange of equities between investors. JSE Limited is a(n) ________.

  1. A) financial broker
  2. B) fund manager
  3. C) treasury
  4. D) stock exchange
  5. E) underwriter firm

 

72) Which of the following statements is true of bond markets?

  1. A) Treasury bills and commercial papers are traded in a bond market.
  2. B) A bond market is a component of a stock market.
  3. C) Exchange trading of futures occurs at a bond market.
  4. D) Most trading is done over the counter in a bond market.
  5. E) A bond market is less diffuse and centralized than the stock market.

 

 

73) ________ is an over-the-counter marketplace for short-term debt instruments such as Treasury bills and commercial papers.

  1. A) Options market
  2. B) Bond market
  3. C) Money market
  4. D) Stock market
  5. E) Futures market

 

74) Gordon Fiber is a firm that manufactures fiber products. The firm is facing a credit crunch and wants to liquidize the treasury bills and commercial papers they have. The firm can sell these at the ________ market.

  1. A) options
  2. B) bond
  3. C) money
  4. D) stock
  5. E) futures

 

75) Which of the following markets includes exchange trading and over-the-counter trading?

  1. A) derivatives market
  2. B) bond market
  3. C) money market
  4. D) stock market
  5. E) currency market

 

76) You want to trade some of the futures that you have. Which of the following markets will facilitate such a trade?

  1. A) money market
  2. B) bond market
  3. C) stock market
  4. D) currency market
  5. E) derivatives market

 

 

77) Arabex is a stock market in one of the developing countries. Most of the stocks listed in the market are increasing in value. Arabex is an example of a(n) ________.

  1. A) partial bear market
  2. B) bull market
  3. C) derivative market
  4. D) bear market
  5. E) commodity market

 

78) Bear market is a market situation in which ________.

  1. A) there are more buyers than sellers
  2. B) the value of assets are increasing
  3. C) short selling is rarely observed
  4. D) most stocks are declining in value
  5. E) most portfolios are not diversified

 

79) James wants to buy some shares of JE Electricals. He instructs the broker to buy 1000 shares at the best possible price immediately. This is an example of a(n) ________.

  1. A) market order
  2. B) control order
  3. C) limit order
  4. D) stop order
  5. E) bounded order

 

 

 

80) You ask your broker to buy 500 shares of Microsoft, if it is available, at a price less than or equal to $26. This is an example of a ________ order.

  1. A) market
  2. B) limit
  3. C) discount
  4. D) stop
  5. E) control

 

81) Stop order is an order to sell a stock when ________.

  1. A) an order is placed by a specific buyer in the stock exchange
  2. B) its price falls to a particular point
  3. C) its p/e ratio crosses a certain level
  4. D) brokerage cost is lower than a specified amount
  5. E) overall price index of the stock exchange exceeds a certain amount

 

82) Short selling refers to selling ________.

  1. A) a stock at a price much above the market price
  2. B) stocks partially from an investor’s portfolio
  3. C) stock borrowed from a broker
  4. D) a contract to sell a product at a later date
  5. E) a stock at a price much below the market price

 

 

83) Which of the following is the most important purpose of issuing a stop order?

  1. A) restricting the possible losses an investor is likely to incur
  2. B) buying a stock if its price reaches a certain level
  3. C) buying stock even without having adequate capital
  4. D) buying a stock if its price falls below a certain level
  5. E) minimizing the brokerage fee on a particular transaction

 

84) Margin trading occurs when a ________.

  1. A) buyer pays the broker immediately after buying a stock
  2. B) broker does not charge brokerage fee for a transaction
  3. C) buyer pays the broker before placing an order
  4. D) broker gives volume discounts to a good buyer
  5. E) buyer borrows money from the broker to buy stock

 

 

85) A buyer engages in short selling when he or she ________.

  1. A) thinks that a stock has high long-term growth potential
  2. B) wants to diversify his or her portfolio
  3. C) believes that a stock’s price is about to drop
  4. D) wants to partially liquidate his or her portfolio
  5. E) thinks that a stock has high short-term growth potential

 

 

86) Compare and contrast common stock and preferred stock.

 

87) Compare and contrast blue chip, income, growth and cyclical stocks.

 

 

88) Explain why companies perform stock split.

 

89) Explain the advantages and disadvantages of investing in bonds rather than in stocks.

 

90) Explain the advantages and disadvantages of investing in mutual funds rather than in individual stocks.

dvantages:

 

91) What is load? What are no-load funds?

 

92) Compare and contrast growth funds, income funds, and value funds.

 

 

93) What are derivatives?

 

94) Compare and contrast call options and put options.

 

95) Compare and contrast options and futures.

 

96) Compare and contrast stock market and bond markets.

 

97) Compare and contrast a money market and derivatives market.

 

98) Describe a bull market and a bear market.

 

 

99) Go to a web site that allows you maintain a virtual portfolio (Example: Yahoo). Create a diversified portfolio in the web site.

 

100) Describe the different order types you can use when you buy or sell a stock.

 

 

Chapter 20   The Money Supply and Banking Systems

 

Business in Action, 6e (Bovee/Thill)

Chapter 20   The Money Supply and Banking Systems

 

1) Money is anything generally accepted as a means of paying for goods and services.

 

 

2) Federal funds rate is the interest rate that member banks pay when they borrow funds from the Fed.

 

 

3) Discount rate is the interest rate that member banks charge each other to borrow money overnight from the funds they keep in the Federal Reserve accounts.

 

 

4) If the Fed sells Treasuries in open-market operations, the country’s money supply increases.

 

5) If the Fed buys Treasuries on the open market, the country’s money supply increases.

 

 

6) The prime rate is the interest rate that a bank charges its most credit-worthy customers.

 

 

7) If the Fed decreases the reserve requirement, banks will have less money to lend.

 

8) Both Fannie Mae and Freddie Mac participate in the secondary mortgage market by purchasing loans originated by banks and other lenders.

 

9) Both Fannie Mae and Freddie Mac are agencies of the FDIC.

 

10) Thrift banks offer a variety of services related to initial public stock offerings and mergers and acquisitions.

 

 

11) Savings and loan associations are not-for-profit, member-owned cooperatives that focus on offering home mortgage loans.

 

 

12) Investment banks are banks that assist high net-worth individuals in managing real estate, establishing trust funds, and planning philanthropic giving.

 

13) Non-bank companies that use their own funds to offer mortgages are known as mortgage brokers.

 

14) Finance companies are non-bank institutions that lend money to consumers and businesses for a wide variety of purposes.

 

15) The term bubble is used to describe a market situation in which low demand for an asset reduces its price far below its true economic value.

 

 

16) If you purchase a house, do some repairs and then resell it for a significant profit, you are flipping the house.

 

17) Loan-to-value (LTV) is commonly defined as the amount of a loan relative to a house’s assessed value.

 

18) Negative amortization occurs when the balance on your mortgage decreases over time.

 

 

19) If you have reliable income, sufficient assets and a good credit history, you would likely qualify for a prime mortgage.

 

20) A borrower is foreclosing when he stops making payments on his mortgage.

 

21) Credit derivatives based on home mortgages are known as mortgage-backed securities.

 

 

22) A security based on auto loans is not an example of an asset-backed security.

 

23) Foreclosures are situations in which lenders take possession of homes after borrowers default on their mortgage payments.

 

 

24) During a liquidity crisis, companies can’t get enough cash to meet their operating needs.

 

25) Credit freeze is a situation in which the federal government bans the issue of new loans.

 

26) Dodd-Frank Act is a legislation aimed at reforming the banking industry.

 

27) Dodd-Frank Act created the Financial Stability Oversight Council to monitor for systemic risks.

 

 

28) Money serves as a ________ when it is used as a way of accumulating wealth until it is needed.

  1. A) unit of accounting
  2. B) means of payment
  3. C) store of value
  4. D) medium of exchange
  5. E) standard of deferred payment

 

29) Money serves as a ________ when it is used to measure the value of goods and services.

  1. A) unit of accounting
  2. B) means of payment
  3. C) store of value
  4. D) medium of exchange
  5. E) standard of deferred payment

 

 

30) The ________ rate is the interest rate that Federal Reserve member banks charge each other to borrow money from the funds they keep in the Federal Reserve accounts.

  1. A) federal reserve
  2. B) discount
  3. C) prime member
  4. D) federal funds
  5. E) federal leaves rate

 

31) When the Federal Reserve buys or sells U.S. Treasury bonds, bills and notes, it is influencing the money supply through ________.

  1. A) imposing reserve requirements
  2. B) offering discount rates
  3. C) selective credit controls
  4. D) open-market operations
  5. E) changing the value of derivatives

 

32) Which of the following is an example of an open market operation?

  1. A) Fed reducing the discount rate for banks
  2. B) Fed imposing selective credit controls
  3. C) Fed buying Treasury bonds
  4. D) Fed increasing the discount rate for banks
  5. E) Fed increasing the reserve requirement on deposits

 

33) The Fed sets the federal funds rate by ________.

  1. A) lending money directly to consumers
  2. B) issuing a mandatory directive
  3. C) issuing a selective directive
  4. D) buying and selling Treasuries
  5. E) securitizing loans issued by member banks

 

 

34) Which of the following federal actions is aimed at increasing the money supply in markets?

  1. A) The Fed imposes more selective credit controls on loans.
  2. B) The Fed buys Treasury bonds from the market.
  3. C) The Federal Reserve raises the discount rate.
  4. D) The Federal Reserve controls the issue of new loans.
  5. E) The Federal Reserve increases the reserve requirement.

 

35) Which of the following federal actions is aimed at reducing the money supply in markets?

  1. A) The Fed liberalizes credit controls actions on loans.
  2. B) The Fed buys treasury bills from the market.
  3. C) The Federal Reserve raises the discount rate.
  4. D) The Federal Reserve reduces the reserve requirement.
  5. E) The Federal Reserve promotes new loans to small businesses.

 

 

36) ________ rate is the rate a bank charges its best loan customers.

  1. A) Federal funds
  2. B) Discount
  3. C) Prime
  4. D) Paper
  5. E) Overnight

 

 

 

37) By altering margin requirements, the Fed is able to influence ________.

  1. A) the foreign exchange value of other currencies trading with the dollar
  2. B) how much cash is tied up in stock market transactions
  3. C) the types of collateral accepted to issue loans
  4. D) how banks receive securities for the loans that they issue
  5. E) the terms of credit for various types of short-term funding alternatives

 

38) The ________ is the federal agency responsible for protecting money in customer accounts and managing the transition of assets whenever a bank fails.

  1. A) Federal National Loan Corporation
  2. B) Federal Deposit Insurance Corporation
  3. C) Federal Home Loan Association
  4. D) Federal Mortgage Corporation
  5. E) Federal National Mortgage Association

 

 

39) ________ is the government-sponsored enterprise responsible for guaranteeing and funding home mortgages.

  1. A) The secondary mortgage market
  2. B) Freddie Mac
  3. C) Fannie Mae
  4. D) The NYSE
  5. E) The Federal Deposit Insurance Corporation

 

40) ________ refers to sums of money, equal to a certain percentage of their deposits, that banks are legally required to keep on hand.

  1. A) Securities
  2. B) Mortgages
  3. C) Reserves
  4. D) Savings
  5. E) Collaterals

 

41) The Fed decides to lower the discount rate offered to banks in the United States. This would ________.

  1. A) slow down economic activities
  2. B) lead to high interest rates
  3. C) slow down market activity
  4. D) increase the money supply
  5. E) reduce the availability of credit

 

42) The Fed decides to increase the reserve requirements on the deposits of banks. This would ________.

  1. A) reduce the money supply
  2. B) lead to low interest rates
  3. C) intensify market activity
  4. D) boost economic activities
  5. E) increase the availability of credit

 

43) Which of the following is a tool available to the Fed to manage the money supply?

  1. A) federal insurance scheme
  2. B) federal funds rate
  3. C) national credit union
  4. D) deposit insurance
  5. E) credit rating agencies

 

44) ________ is a secondary mortgage quasi-independent corporation created in 1970.

  1. A) The secondary mortgage market
  2. B) Freddie Mac
  3. C) Fannie Mae
  4. D) The NYSE
  5. E) The Federal Deposit Insurance Corporation

 

 

45) Banks that provide financial services to consumers are called ________.

  1. A) loan associations
  2. B) retail banks
  3. C) thrift banks
  4. D) credit unions
  5. E) merchant banks

 

 

46) Loather Bank is a commercial bank in Italy. The bank offers financial services to individuals in Italy. The major products of the bank include personal loans, savings accounts, credit cards, and debit cards. Loather Bank is a(n) ________.

  1. A) investment bank
  2. B) retail bank
  3. C) thrift bank
  4. D) credit union
  5. E) merchant bank

 

47) ________ offer financial services to businesses, particularly in the area of international finance.

  1. A) Investment banks
  2. B) Retail banks
  3. C) Private banks
  4. D) Credit unions
  5. E) Merchant banks

 

 

48) Banking institutions that offer deposit accounts and focus on offering home mortgage loans are known as ________.

  1. A) merchant banks
  2. B) retail banks
  3. C) thrift banks
  4. D) private banks
  5. E) credit unions

 

49) Rhombus bank is a bank that focuses on home mortgages. The bank has 283 offices and has issued more than 0.1 million home loans to people with different income levels. The bank also accepts deposits to generate money for providing home loans. Rhombus bank is best referred to as a(n) ________.

  1. A) merchant bank
  2. B) credit union
  3. C) thrift bank
  4. D) private bank
  5. E) investment bank

 

50) ________ are not-for-profit, member-owned cooperatives that offer deposit accounts and lending services to consumers and small businesses.

  1. A) Loan associations
  2. B) Retail banks
  3. C) Credit unions
  4. D) Thrift banks
  5. E) Merchant banks

 

51) EBL is a financial institution headquartered in Rochester, New York. Membership in EBL is open to residents of Rochester and is financed by the members themselves. EBL accepts deposits from its members and provides loans to its members. EBL provides a low-cost finance option to the residents of Rochester. EBL is a ________.

  1. A) loan association
  2. B) retail bank
  3. C) credit union
  4. D) thrift bank
  5. E) merchant bank

 

52) ________ banking refers to a range of banking services for high-net-worth individuals and families, such as managing real estate and other investments.

  1. A) Investment
  2. B) Retail
  3. C) Thrift
  4. D) Private
  5. E) Merchant

 

53) DBS bank has formed a special department to attract investments from wealthy individuals. The new department aims to obtain accounts that maintain a minimum balance of $20,000 or more. It also aims to offer premium credit cards and asset management services to such individuals. This is an example of ________.

  1. A) investment banking
  2. B) retail banking
  3. C) thrift banking
  4. D) merchant banking
  5. E) private banking

 

 

54) ________ banks offer a variety of services related to initial public stock offerings, mergers and acquisitions.

  1. A) Merchant
  2. B) Retail
  3. C) Thrift
  4. D) Private
  5. E) Investment

 

55) Which of the following is a service that is typically offered by investment banks?

  1. A) current accounts
  2. B) personal loans
  3. C) stock offerings
  4. D) home loans
  5. E) collateralized loans

 

56) Jackson Group, Inc. is an American multinational banking firm. It offers such services as stock market brokerage, underwriting, and initial public offering. Jackson Group is an example of a(n) ________.

  1. A) merchant bank
  2. B) credit union
  3. C) thrift bank
  4. D) private bank
  5. E) investment bank

 

57) ________ are non-bank companies that initiate loans on behalf of a mortgage lender in exchange for a fee.

  1. A) Mortgage brokers
  2. B) Credit unions
  3. C) Thrifts
  4. D) Loan associations
  5. E) Independent mortgage companies

 

 

58) Independent mortgage companies are non-bank companies that ________.

  1. A) initiate loans on behalf of an investment bank
  2. B) use their own funds to offer mortgages
  3. C) use pooled funds to offer mortgages
  4. D) initiate loans on behalf of a mortgage lender
  5. E) offer opinions about the creditworthiness of borrowers

 

59) ________ are non-bank companies that use their own funds to offer mortgages.

  1. A) Mortgage agencies
  2. B) Mortgage brokers
  3. C) Credit unions
  4. D) Loan associations
  5. E) Independent mortgage companies

 

60) ________ are non-bank institutions that lend money to consumers and businesses for such purposes as cars, home improvements, and purchases.

  1. A) Finance companies
  2. B) Mortgage brokers
  3. C) Thrifts
  4. D) Credit unions
  5. E) Loan associations

 

 

61) Experian, TransUnion, and Equifax are the three major ________ in the United States.

  1. A) credit rating agencies
  2. B) mortgage brokers
  3. C) investment bankers
  4. D) credit unions
  5. E) finance companies

 

62) ________ is a market situation in which frenzied demand for an asset pushes the price of that asset far beyond its true economic value.

  1. A) Liquidity crisis
  2. B) Bubble
  3. C) Default
  4. D) Asset crisis
  5. E) Credit freeze

 

 

63) Labex Chemicals has invented a new vaccine for pneumonia in children. The vaccine is hyped to bring in huge profits for the firm. Because of this hype, the market value of Labex’s shares increase by 300 percent. Many experts believe that this appreciation is much more than the likely benefits that the shareholders will receive. This situation exemplifies a(n) ________.

  1. A) liquidity crisis
  2. B) bubble
  3. C) payment shock
  4. D) asset crisis
  5. E) credit freeze

 

64) The dot-com bubble occurred due to ________.

  1. A) faulty securitization by investment bankers
  2. B) the lack of infrastructure to build web sites
  3. C) subprime lending by commercial bankers
  4. D) the rush among internet companies to go public
  5. E) reduced governmental spending in the technology sector

 

65) Lower interest rates will ________.

  1. A) tempt people buy cheaper homes
  2. B) lead to low prices of houses
  3. C) boost the housing market
  4. D) make the credit procedures stricter
  5. E) have an overall negative impact in the housing market

 

66) Charles buys a house and waits till its value rises. He then resells the house to make a big profit. This act of making profit by reselling is referred to as ________.

  1. A) credit swapping
  2. B) flipping
  3. C) defaulting
  4. D) foreclosing
  5. E) securitization

 

67) You have purchased your first home for $100,000, and the mortgage lender tells you that you will need a down payment of $15,000 because it will only lend you 85% of the purchase price. This percentage is known as the ________.

  1. A) mortgage-ownership ratio
  2. B) loan-to-value
  3. C) prime mortgage ratio
  4. D) ownership criterion
  5. E) mortgage-to-price

 

68) The LTV value of the home loans issued by a bank is 80 percent. This means that the ________.

  1. A) borrowers must make a down payment of at least 20 percent
  2. B) loan is offered at a low interest rate
  3. C) loan is offered at prime rate to borrowers
  4. D) interest charged on the loan amount is 8 percent
  5. E) borrowers should provide a third-party guarantee for 80 percent of the loan amount

 

 

69) In an adjustable rate mortgage, ________.

  1. A) collateral is not accepted as security
  2. B) initial interest rates are very high
  3. C) amortization is always positive
  4. D) borrowers will have a low credit rating
  5. E) people can buy more house than they can afford

 

70) A mortgage loan that has a variable interest rate over the life of the loan is known as a(n) ________ mortgage.

  1. A) adjustable term
  2. B) secondary
  3. C) subprime
  4. D) prime
  5. E) adjustable rate

 

71) ________ is a payment situation in which the balance owed on a loan increases over time rather than decreases.

  1. A) Loan-to-value shock
  2. B) Subprime crisis
  3. C) Payment shock
  4. D) Negative amortization
  5. E) Loan depreciation

 

 

72) Prime mortgages refer to home loans that ________.

  1. A) offer loan-to-value as high as 125 percent
  2. B) require high levels of documentation
  3. C) are offered at a very high interest rate
  4. D) lead to negative amortization
  5. E) are offered to the most creditworthy customers

 

73) Andrew has a low credit score and his home loan application was rejected by many banks. However, RS bank offers a home loan to him with loan-to-value at 80 percent. This loan is an example of a(n) ________.

  1. A) subprime mortgage
  2. B) high LTV loan
  3. C) option ARM
  4. D) zero LTV loan
  5. E) unsecured loan

 

 

74) ________ is a situation in which borrowers stop making payments on a loan.

  1. A) Liquidity crisis
  2. B) Bubble
  3. C) Foreclosure
  4. D) Default
  5. E) Securitization

 

 

75) A(n) ________ is a licensed professional who is hired to give an independent assessment of a home’s value.

  1. A) value analyst
  2. B) appraiser
  3. C) broker
  4. D) thrift
  5. E) loan agent

 

76) In the secondary mortgage market, ________.

  1. A) mortgage originators sell their loans to investors
  2. B) deposits are collected to fund mortgages
  3. C) non-banking companies issue prime loans
  4. D) stocks are traded to fund mortgages
  5. E) non-banking companies issue subprime loans

 

 

77) ________ is a process in which debts, such as mortgages, are pooled together and transformed into investments.

  1. A) Stock splitting
  2. B) Collateralization
  3. C) Securitization
  4. D) Amortization
  5. E) Derivatization

 

 

78) Which of the following is an example of an asset-backed security?

  1. A) a debenture issued by a reputed U.S. corporation
  2. B) a derivative based on auto loans
  3. C) a home loan issued by a bank
  4. D) equity share of a U.S. company
  5. E) a preference share issued by a U.S corporation

 

79) ________ refers to a situation in which a lender takes possession of the collateralized home after the borrower defaults on his or her mortgage payments.

  1. A) Liquidity crisis
  2. B) Foreclosure
  3. C) Securitization
  4. D) Credit freeze
  5. E) Negative amortization

 

 

80) ________ helped fuel the housing bubble by expanding the secondary market for subprime loans.

  1. A) Collateralization
  2. B) Privatization
  3. C) Securitization
  4. D) Mortgaging
  5. E) Amortization

 

 

81) The recession is 2007 was caused due to ________.

  1. A) poor performance of the automobile sector
  2. B) a fall in imports to the United States
  3. C) an unstable housing market
  4. D) a fall in foreign direct investments
  5. E) the slow growth of manufacturing industries

 

82) ________ refers to a severe shortage of cash during which companies can’t get enough cash to meet their operating needs.

  1. A) Liquidity crisis
  2. B) Credit swap
  3. C) Asset crisis
  4. D) Payment shock
  5. E) Credit default

 

83) The situation in which loans and other sources of funding become scarce is known as a(n) ________.

  1. A) credit default
  2. B) asset crisis
  3. C) payment shock
  4. D) credit freeze
  5. E) liquidity crisis

 

 

84) The Dodd-Frank Act is a legislation aimed at ________.

  1. A) promoting subprime mortgages
  2. B) reforming the banking industry
  3. C) outlawing financial insurances
  4. D) outlawing loan foreclosures
  5. E) establishing more credit agencies

 

85) Which of the following statements is true of the Dodd-Frank Act legislation passed in 2010?

  1. A) The Act was formed to reform the software industry.
  2. B) The Act made it mandatory to bail out suffering banks.
  3. C) The Act outlawed transferring risk on investments.
  4. D) The Act called for closer scrutiny of the derivatives market.
  5. E) The Act recommends short-term incentives to long-term incentives.

 

 

 

86) Compare and contrast federal funds rate and discount rate.

 

 

87) Explain how changing reserves will affect the money supply.

 

88) Explain how selective credit controls can control stock market transactions.

 

89) Compare and contrast commercial banks and investment banks.

 

90) Compare and contrast retail banks and merchant banks.

 

91) Compare and contrast thrift banks and credit unions.

 

92) Compare and contrast independent mortgage companies and mortgage brokers.

 

93) Discuss the different ways in which lowering mortgage interest rates can heat up the housing market.

 

94) What is a bubble?

 

95) Many borrowers have suffered financially as a result of adjustable rate mortgages and option ARM’s. Some borrowers purchased homes based on low introductory rates and then suffered payment shock when interest rates increased and so did their monthly payments. Option ARM’s allowed borrowers to make payments that did not even cover accruing interest on the mortgage, resulting in negative amortization in some cases. Should the federal government regulate adjustable rate mortgages and option ARM’s? Why or why not? Support your reasoning.

 

 

96) Subprime mortgages can help the poor build their own houses. Critically analyze this statement.

 

97) Describe how MBS issuers tranch an MBS into multiple layers.

 

98) What are foreclosures? When do such situations occur?

 

99) Explain how the housing bubble collapsed in 2008 to lead to a financial crisis.

 

100) Compare and contrast liquidity crisis and a credit freeze.

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