Test Bank For Better Business, 6th edition Michael R. Solomon, Mary Anne Poatsy, Kendall Martin Chapter 1-16With Mini Chapter Chapter 1 Business Basics 1) Which of the following occurs when company's revenue is greater than its expenses? A) The company earns a profit B) The company spends more than it earns C) The company's income is decreasing D) The company needs to increase its spending E) The company must increase its productivity Answer: A Explanation: A company earns a profit when it takes in more revenue (earnings) than it spends. If a company spends more than it earns, it does not make a profit. Instead, it suffers a loss. A company can make a profit even if its income is decreasing, as long as its earnings continue to exceed its expenses. A profitable company may or may not need to increase its spending, depending on its business goals. Diff: 1 AACSB: Reflective Thinking LO: 1.1: Define business, and list the factors of production. Classification: Concept Learning Outcome: Explain how economic performance is monitored 2) What are the physical products that a business offers referred to as? A) Goods B) Services C) Assets D) Devices E) Intangible Answer: A Explanation: By definition, physical products that a business offers are called goods. Services are intangible products, for example, hair styling or bookkeeping. A physical product may be an asset to the business or the purchaser, but it is a more general term that could include any valuable product or aspect of the business. A device is a physical product, but not all physical products are devices. For instance, pizza would be considered a physical product, but a pizza is not a device. Diff: 1 AACSB: Reflective Thinking LO: 1.1: Define business, and list the factors of production. Classification: Concept
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