Week 1 Knowledge Check

The material presented below is not meant to be a comprehensive list of all you need to know in the content area. Rather it is a starting point for building your knowledge and skills. Additional study materials are recommended in each area below to help you master the material.

Personalized Study Guide Results:

Questions 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Business Systems

100%

Productive Resources

100%

Law of Supply

100%

Law of Demand

100%

Calculating Profit

100%

Calculating Profitability

67%

Effect of the Business Model

33%

Concept: Business Systems

Mastery 100% Questions Materials on the concept:

1 2 3

The Three Meanings of Business Overview What is Business? How Business Creates Value for People: The Plan of This Book Business as an Organization

1 . What are the three components that make up a business system?

A. Business commerce, business organization, business occupation B. Business organization, business management, business exchange C. Business commerce, business organization, business market D. Business market, business management, business organization

Correct : The three components that make up a business system are as follows: business commerce, business occupation, and business organization. Materials

The Three Meanings of Business

2 . Which term refers to the total money or assets of a business?

A. Competitive advantage B. Sales revenue C. Capital D. Wealth

Correct : Profit that is kept in a company and invested in its business increases its capital, the total monetary value of its financial assets such as cash, property, land, stock, patents, and brand name (Jones, 2007, p. 8). . Materials

What is Business?

3 . Information technology, e-commerce, human resource management, and procurement are included in what type of value chain function in a business?

A. Tertiary function B. Complimentary function C. Primary value function D. Secondary value function

Correct : There are primary and secondary value chain functions in business. Information technology, ecommerce, human resource management, and procurement are considered secondary functions because they are not directly responsible for getting products to customers (Jones, 2007, p. 27). Materials

How Business Creates Value for People: The Plan of This Book

Concept: Productive Resources

4 5 6

How Business Organizations Lower Transaction Costs What is Business? Transaction Costs Related to Business Business as an Organization

4 . Which of the following best describes a system through which goods or services are exchanged for capital with the aim of making a profit?

A. Productive resources B. Business C. Value-creation process D. Competitive advantage

Correct : Business is a goal-directed behavior aimed at getting and using productive resources to buy, make, trade, and sell goods and services that can be sold at a profit (Jones, 2007, p. 7). Materials

What is Business?

5 . Capital, land, enterprise, and labor are all costs associated with making and selling goods. What do they determine?

A. Sales revenue B. Value C. Operating costs D. Competitive advantage

Correct : Productive resources are made possible with four ingredients: land, labor, capital, and enterprise. The cost of acquiring and using these four resources to make and sell goods and services determines the companys operating costs (Jones, 2007, p.7). Materials

What is Business?

6 . Enterprise, as a main component of business, requires which of the following?

A. Inputs, machinery and computers B. Employing the right people for the tasks C. Foresight, drive, knowledge, and ingenuity D. Operating from an appropriate facility

Correct : Enterprise is a crucial ingredient in the business concept. It is the foresight, drive, knowledge, ability and ingenuity that help to drive a business to sell goods and services for a profit (Jones, 2007, p. 7). Materials

What is Business?

Concept: Law of Supply

7 8 9

Demand, Supply, and the Market Price Developing Business Skills

Determining the Market Price

7 . In economics, what principle indicates the value placed on a product lessens as consumption increases?

A. Demand value B. Supply utility C. Diminishing marginal utility D. Scarcity value

Correct : The diminishing marginal utility principle states that the value people receive from an additional unit of a product declines as they obtain more of the product (Jones, 2007, p. 12). Materials

Demand, Supply, and the Market Price

8 . This is the point at which the supply of the product just meets the demand for it.

A. Market B. Demand curve C. Margin D. Supply curve

Correct : In economics, the laws of supply and demand operate together to determine the price at which products will be sold in a market. The margin is the point where the supply of a product just meets the demand for it (Jones, 2007, p. 13). It is at this point that people must carefully a ssess the value of a particular product or service. Materials

Determining the Market Price

9 . What law shows that there is a direct relationship between the price of a product and the amount that is supplied in the market?

A. Law of demand B. Law of market price C. Law of market systems D. Law of supply

Correct :

The higher the price of a product, the more of it will be supplied. Conversely, the lower the price of a product is, the less of it will be supplied (Jones, 2007, p. 13). Materials

Demand, Supply, and the Market Price

Concept: Law of Demand

10 11 12

Demand, Supply, and the Market Price Developing Business Skills Business as an Occupation Specialization and Profitability over Time

10 . What law refers to the tendency of people to buy more of a product when the price is lower and less of it when its price is higher?

A. Law of supply B. Law of market increase C. Law of diminishing marginal utility D. Law of demand

Correct : The law of demand specifies that customers will buy more of a product when it is priced low and less of a product when it is priced high. Materials

Demand, Supply, and the Market Price

11 . In general, the more a particular product is valued, the more it is demanded. Which is true in regard to this statement?

A. The higher the demand, the higher the price and the product is harder to find. B. The higher the demand, the lower the price and the product is harder to find. C. The higher the demand, the higher the price and the product is easy to find. D. The higher the demand, the lower the price and the product is easy to find.

Correct : As the value or demand of a product increases, the price will also increase and it will not be as readily available. Materials

Demand, Supply, and the Market Price

12 . What will most likely increase the demand for better quality goods and services?

A. Increase in self-interest B. Decrease in profitability C. Decreasing demand D. Increasing specialization

Correct : When a business increases its specialization, it begins a circular effect on the business. Increasing specialization increases the quantity generated. This, in turn, increases the income generated and that also increases the division of labor. This leads to an increase in demand for better quality goods and services. Materials

Specialization and Profitability over Time

Concept: Calculating Profit

13 14 15

The Business Model and Profitability The Difference Between Profit and Profitability

13 . What is defined as the absolute monetary difference between sales revenues and operating costs?

A. Profit B. Profitability C. Supply D. Demand

Correct : Profit is the total or absolute monetary difference between sales revenues and operating costs (Jones, 2007, p. 14). It is calculated by subtracting the total operating costs from the total sales. Materials

The Difference Between Profit and Profitability

14 . What equation correctly shows how profit is calculated?

A. Profit = (Purchases) (Total Sales Revenues) B. Profit = (Total Sales) (Total Operating Costs) C. Profit = (Total Operating Costs) (Total Sales) D. Profit = (Total Sales) (Purchases)

Correct : Profit is defined as the total or absolute monetary difference between sales revenues and operating costs (Jones, 2007, p. 14). It is calculated by subtracting the total operating costs from the total sales. Materials

The Difference Between Profit and Profitability

15 . If a company were to have a total sales revenue of $50 and a total operating cost of $37, what is the total profit?

A. $ -13 B. $87 C. $37 D. $13

Correct : Profit is defined as the total or absolute monetary difference between sales revenues and operating costs (Jones, 2007, p.14). In this case, the total sales revenue is $50 and the total operating costs is $37. Profit = (Total Sales) (Total Operating Costs), or P = $50 $37, $13 Profit. Materials

The Difference Between Profit and Profitability

Concept: Calculating Profitability

Mastery 67% Questions Materials on the concept:

16 17 18

The Business Model and Profitability The Difference Between Profit and Profitability

16 . What measures how efficient a company uses its capital and resources to generate returns for its investors?

A. Sales B. Profit C. Profitability D. Revenues

Correct : Profitability is measured by dividing the total profit by the total amount of capital invested. This tells you how well a company is investing its resources. Materials

The Difference Between Profit and Profitability

17 . Which equation correctly shows how to calculate profitability?

A. Profitability = (Total Profit) (Total Amount of Capital Invested) B. Profitability = (Total Amount of Capital Invested) / (Total Profit) C. Profitability = (Total Amount of Capital Invested) (Total Profit) D. Profitability = (Total Profit) / (Total Amount of Capital Invested)

Incorrect : Profitability is measured by dividing the total profit by the total amount of capital invested. This tells you how well a company is investing its resources. Materials

The Difference Between Profit and Profitability

18 . Imagine Company A has a total profit of $40 million and that it invested $400 million in the course of a year. Company B has a total profit of $20 million and has invested $80 million over the course of the year. Which company has the greater profitability?

A. Company A B. Company B C. They have the same profitability D. Profitability cannot be determined from the information given

Correct : Profitability can be calculated by dividing the total profit by the total amount of capital invested. Company A has 10% profitability whereas Company B has 25% profitability. Because Company B has a larger percentage, it has the higher profitability of the two companies. Materials

The Difference Between Profit and Profitability

Concept: Effect of the Business Model

19 20 21

Developing Business Skills The Business Model and Profitability Business as an Occupation Specialization, the Division of Labor, and Peoples Well-Being What is Business?

19 . What defines a group of companies that have similar products and business activities?

A. Field of interest B. Business model C. Industry D. Business system

Incorrect : A group of like companies is called an industry; the companies make similar products and engage in similar business activities. Materials

The Business Model and Profitability

20 . How does specialization assist a business in becoming more productive?

A. Employees become more skilled at specific tasks. B. Better equipment aids employees in increasing their output. C. Product management is more efficient and easier to maintain. D. Sunk costs are eliminated by reinvesting into new product lines.

Incorrect : By specializing, businesses and individuals become more skilled and productive. Together, they produce a greater quantity of goods and services. Materials

Specialization, the Division of Labor, and Peoples Well-Being

21 . What are the four productive resources that make a business possible?

A. Sales, profit, profitability, supply B. Land, labor, capital, enterprise C. Supply, demand, land, labor D. Capital, labor, supply, demand

Correct : Land, labor, capital, and enterprise make up the operating costs of business. These are the productive resources that make the business possible. Materials

What is Business?