Principles of Business, Marketing and Finance

Final Exam Review

True/False Indicate whether the statement is true or false. 1. ____One of the problems in economics is that wants are unlimited. 2. ____ There are only two kinds of economic resources: human and capital. 3. ____ The profit motive is designed to allow lazy owners to become rich. 4. ____Psychographics focus attention on the way people spend their time and the motives behind their actions. 5. ____Supply means the quantity of a product or service that businesses are willing and able to provide at a particular price. 6. ____When you pay your taxes, you are performing your citizen role. 7. ____When a product is in the decline stage, a business may decide to broaden the market by adding new features or by finding new uses for the product. 8. ____The total dollar value of all final goods and services produced in a country during one year is called the Gross Domestic Product (GDP). 9. ____The base year used in comparing GDPs adds confusion to the comparison. 10. ____With the many modes of transportation available today, few products rely on using a combination of methods to get to the consumer. 11. ____A supermarket, a bank, and a utility company are all examples of businesses. 12. ____A farmer who grows crops and a mining company that produces copper are examples of manufacturers. 13. ____Marketing involves just transporting and selling products. 14. ____All businesses must raise capital, use human resources, and keep records. 15. 16. 17. 18.

____A corporation is a legal entity and has a life separate from its owners. ____Managers have to plan, control, lead, staff, and organize. ____Franchises can be operated only as sole proprietorships or partnerships. ____A business owned by its members that is managed in the owners' interests is called a cooperative.

Multiple Choice Identify the choice that best completes the statement or answers the question. 19. ____Which of the following is NOT a need? a. food c. car b. housing d. clothing 20. ____Which of the following are goods? a. jackets c. gasoline b. CD players d. all of the above 21. ____The means through which goods and services are produced are called ____. a. factors of production c. production materials b. natural resources d. human resources 22. ____Which of the following statements about natural resources is true? a. Natural resources satisfy wants by themselves. b. Natural resources require people to turn them into goods. c. Natural resources come from the earth and water but not the sky. d. Natural resources include people who operate plows and tractors. 23. ____The person who checks out purchases at the supermarket is part of ____. a. natural resources c. human resources b. capital resources d. none of the above 24.____Members of a family might not be able to afford the things they want because of an economic factor called ____. a. the basic economic problem c. multiple greed b. the family economic problem d. human desires 25. ____Which of the following describes a situation in which scarcity can be a problem? a. A city wants to give fire fighters a large increase in pay. b. A business wants to enlarge its plant. c. A family wants to go on an extended vacation. d. all of the above 26. ___Which of the following is NOT true about economic decision making? a. It applies to almost all kinds of decisions. b. It has not been proven as a way of making good decisions. c. It is a process of choosing which wants will be satisfied.

d. It is a six-step process. 27.___What step is defining the problem in the decision-making process? a. second c. last b. first d. third 28. ____Some of our wants are satisfied through the efforts of other people. These are called ____. a. services c. capital b. goods d. resources 29. ____Rob has saved $1,000 to invest in summer lawn care business. This $1,000 is best referred to as ____. a. labor c. capital b. goods d. income 30. ___The iron ore used in making steel for engine components and the crude oil used in making lubricants are examples of ____. a. labor c. goods b. capital d. natural resources 31. ___Sneakers, a basketball, and a sports magazine are examples of ____. a. goods c. capital b. scarcity d. needs 32.____ When you must choose between two alternatives that will satisfy you, for example, buying a new video or going to see a movie, you are making ____. a. capital investments c. economic choices b. factors of production d. limited resources 33. ___Food, clothing, and housing are examples of ____. a. wants c. capital b. needs d. natural resources 34. ____The fact that we do not have an endless supply of natural resources is best described as ____. a. scarcity c. factors of production b. capital d. needs 35. ____A market economy is one in which ____. a. buyers and sellers operate according to government guidelines b. individuals are free to engage in business transactions c. stores stay open until late at night d. there is a central market committee that solves problems 36. ____An economic system in which the government makes decisions about what and how much is to be produced is a a. mixed economy c. marketplace economy b. directed or planned economy d. capitalistic economy 37. ____Which of the following are characteristics of capitalism? a. Economic resources are privately owned. b. Individuals are free to decide what to produce. c. Decisions about production and distribution are made through voluntary exchange. d. All of the above. 38. ____The right to own, use, and dispose of things of value is the right of ____. a. private property c. competition b. profit d. choice 39. ____Advertisements that are aimed at making consumers want to buy "new" or "improved" products result primarily from ____. a. competition in the marketplace c. requirements of the market economies b. private property ownership d. newspapers that need to fill space 40. ____Freedom of choice allows you to do which of the following ? a. enter the business you want to enter c. earn a profit by competing in business b. select the career you want most d. All of the above. 41. ____Which of the following is one of the key economic questions? a. What goods and services are to be produced? b. For whom should the goods and services be produced? c. How should goods and services be produced? d. All of the above. 42. ____A nation's plan for answering key economic questions is called its ____. a. political system c. economic system b. planned economy d. resource plan 43. ___ In this economy resources are owned and controlled by the government. a. custom-based economy c. market economy

b. planned economy d. none of the above 44. ____In this economy, the three key economic questions are answered through individuals buying and selling activities in the marketplace. a. custom-based economy c. market economy b. planned economy d. directed economy 45. ____An advertisement describing the environmental benefits of driving a new hybrid car versus driving an older, gas-engine car, is an example of a. product and service management b. selling c. promotion d. marketing-information management 46. ____Which of the following most accurately describes a target market? a. a group of consumers who have the income necessary to buy a company’s products or services b. a group of consumers to whom the business wants to sell its products or services c. a group of consumers whom want the products or service d. a group of consumers with the greatest desire to buy a company’s products or services 47. ____In choosing a target market for a new, upscale restaurant featuring primarily pizza and sandwiches, which of these factors is LEAST likely to be an important consideration? a. Where do potential customers live? b. How much income do potential customers have? c. What price are potential customers willing to pay for this product and service? d. What do potential customers do for a living? 48. ____Which of the following products or services would be the most likely candidate for market segmentation? a. automobiles c. paper products b. soft drinks d. computers 49. ____Which of the following is NOT an aspect of demographic segmentation? a. education level c. interests b. occupation d. marital status 50. ____Which of the following is NOT an aspect of psychographic segmentation? a. attitudes c. lifestyle b. age d. opinions 51. ____What is the effect of dollar votes by consumers? a. Demand is affected. b. Businesses learn about consumer preferences. c. Businesses are helped in making decisions. d. all of the above 52. ____Which of the following is the best definition of supply? a. what consumers are willing and able to buy b. what producers would like to produce c. what producers are able to produce at a given price d. what business would like consumers to buy 53. ____Which of the following is NOT true about prices? a. If prices are too high, consumers won't buy. b. If prices are too low, businesses will not earn a profit. c. Prices are affected by both supply and demand. d. Setting a price does not require any study by a business. 54. ____The factor that helps to keep prices at a reasonable level is ____. a. kind-hearted people c. government regulations b. competition among businesses d. profit motive 55. ____Productivity is affected by ____. a. technology and worker training b. the number of workers in the work force c. the wages paid to workers d. all of the above 56. ____The quantity of a good or service that businesses are willing and able to sell at a particular price is called ____. a. supply c. inventory b. demand d. none of the above 57. ____If the public expresses a strong desire for a type of product, its price will tend to ____.

a. increase c. remain the same b. decrease d. none of the above 58. ____If one store must lower its prices in response to another store's advertised low prices, it is facing the effects of a. productivity c. standard of living b. supply d. competition 59. ____The quantity of a good that an average worker can produce in an hour is known as ____. a. supply c. labor productivity b. demand d. standard of living 60. ____Goods that are very desirable and scarce have prices that tend to remain ____. a. high c. competitive b. low d. none of the above 61. ___One way to improve our standard of living is to increase our ____. a. productivity c. demand b. supply d. prices 62. ____Reducing inventory by selling the product at lower prices through secondary markets is a strategy often used during the _____ stage of the product life cycle. a. planned obsolescence c. decline b. maturity d. growth 63. ____Recycled paper products are beginning to appear in new forms, such as Post-it notes of various colors. These products are being heavily advertised and sales are increasing. This would tend to indicate that recycled paper products are in the _____stage. a. maturity c. decline b. growth d. introduction 64.____Which of the following factors is most relevant when using supply and demand to determine price? a. whether to use price or nonprice competition b. whether demand for the product is elastic or inelastic c. whether consumers are willing to pay a premium for a high-quality product d. whether most consumers will be purchasing the product on credit 65. ____In which of these situations might penetration pricing be a useful strategy? a. Demand for a new product is determined to be very inelastic. b. A new upscale perfume is introduced. c. Advertising has already created a strong demand for a product. d. A new soft drink brand is introduced. 66. ____Gross domestic product is ____. a. the total value of all goods produced in a year b. the total value of all final goods and services produced in a year c. the total value of all services produced in a year d. none of the above 67. ____Which of the following would NOT be counted in computing GDP? a. building a do-it-yourself picnic table for your own yard b. hamburgers you flip on your job at a fast-food restaurant c. a pair of socks you sell on your job at a department store d. all of the above 68. ____The year chosen to compare data such as GDP is known as the ____. a. comparative year c. base year b. GDP year d. calculating year 69. ____When the effect of price changes is taken out of GDP, we have ____. a. inflated GDP c. undervalued GDP b. real GDP d. GDP per capita 70. ____Which of the following is true about the business cycle? a. It has four phases. b. There are recurring ups and downs. c. There is a pattern of good times to bad times and back again. d. all of the above 71.____Prosperity is the condition when ____. a. businesses are beginning to lay off workers b. the business cycle is at its high point c. interest rates are low

d. demand for goods and services is weak 72. ____Which of the following is the correct sequence of the phases of the business cycle? a. recovery, recession, depression, prosperity b. prosperity, recovery, recession, depression c. prosperity, recession, recovery, depression d. prosperity, recession, depression, recovery 73. ____The phase in which unemployment begins to decrease, demand for goods and services increases, and GDP begins to rise. a. recession c. depression b. recovery d. deflation 74. ____A period where demand begins to decrease, businesses lower production of goods and services, unemployment begins to rise, and GDP growth slows for two or more quarters in the calendar year. a. recession c. depression b. recovery d. deflation 75. ____A phase marked by a prolonged period of high unemployment, weak sales of goods and services, and business failures. a. recession c. depression b. inflation d. deflation 76. ____A sustained increase in the general level of prices. a. recession c. deflation b. inflation d. Recovery 77. ____A steady increase in production of goods and services in an economic system. a. economic growth c. deflation b. inflation d. productivity increase 78. ____In a channel of distribution, which of the following roles would a realtor play a. producer c. retailer b. agent or broker d. consumer 79. ____Which of these functions would most likely NOT be performed by a wholesaler? a. storing excess product b. buying from multiple producers and distributing to multiple retailers c. pricing and promoting products d. helping manufacturers analyze sales data 80. ____Which of the following purchases demonstrates the use of an indirect channel of distribution? a. buying produce from a farmer at a farmer’s market b. ordering jewelry online c. calling L.L. Bean to buy a sweater d. buying produce from a grocery store 81. ____Which of the following market conditions makes a direct channel of distribution a better choice? a. the market consists of a small number of customers b. all of the customers are located in a small geographic area c. the product is customized to meet specific customer needs d. all of these make a direct channel of distribution a better choice 82. ___ A business that takes natural resources and converts them to consumer goods is a ____. a. manufacturer c. marketer b. extractor d. wholesaler 83. ____A business that moves goods from producer to consumer is a ____. a. manufacturer c. extractor b. marketer d. government agency 84. ____Which of the following is a type of manufacturing? a. custom manufacturing c. processing b. mass production d. all of the above 85. ____Which of the following is a function performed by all businesses? a. generating ideas c. keeping records b. raising capital d. all of the above 86. ____Which of the following is NOT true about raising capital? a. Start-up money is critical to a business. b. Capital may come from the owner's personal funds. c. Once raised, capital does not have to be raised again. d. Loans from financial institutions are common sources of capital. 87. ____Which of the following is a true statement about the use of human resources by businesses?

a. All business firms have a system for hiring and developing workers. b. Businesses cannot operate without people. c. There are few regulations relating to employing workers. d. Human resource activities are carried out by financial managers. 88. ____What effect does a new business have on a community? a. It has multiple benefits. c. Other businesses are not affected. b. It profits only the new business. d. Few resources are needed. 89. ____Businesses affect a community when they ____. a. buy products c. employ workers b. use services d. all of the above 90. ____The farmer who grows wheat which will eventually become bread is known as a(n) ____. a. manufacturer c. marketer b. processor d. Extractor 91. ___The business that takes raw materials and turns them into some usable form is known as a(n) ____. a. manufacturer c. marketer b. extractor d. transformer 92. ____A firm that creates a product to meet a customer's specifications engages in ____. a. mass production c. custom manufacturing b. bulk processing d. marketing 93. ____Changing something from one form to another so it can be consumed or used to make something else is known as a. extracting c. marketing b. processing d. evolution 94. ____Getting the product from the producer into the hands of the consumer is just one function of ____. a. extracting c. marketing b. processing d. manufacturing 95. ____The type of business that does something for you rather than providing products is called ____. a. manufacturing c. goods producing b. service d. extractor 96. ____When a department store hires a janitorial service to clean after business hours, it is ____. a. generating ideas c. raising capital b. buying goods and services d. producing goods and services 97. ____Businesses keep records for which of the following reasons? a. to determine how successful or unsuccessful they are b. to provide a basis for management decisions c. to supply information required by law d. all of the above 98. ____After a promotional mix is determined, the _____ will be spread among the promotional mix activities. a. budget c. timeline b. sales personnel d. potential customers 99. ____Which of the following is NOT true about publicity? a. it is less expensive than advertising b. advertisers have more control over the content c. it is often perceived to be more credible than advertising d. it can reach a large audience 100.____A form of business that is based on a written agreement about how to manage it and how to share profits is the a. corporation c. sole proprietorship b. partnership d. cooperative 101. ____The form of business that requires written permission from the state in which it is organized and can have many owners is the ____. a. corporation c. sole proprietorship b. partnership d. cooperative 102. ____People who become part owners of a corporation are called ____. a. partners c. shareholders. b. special owners d. cooperative owners 103. ____The part of the profits that are paid to shareholders is called ____. a. excess profit c. a dividend b. a surplus d. none of the above