1. Which of the following BEST explains why the U.S. is described as a “service economy”?
A. Most U.S. firms focus on mass production
B. Service firms greatly outnumber manufacturing firms
C. U.S. firms export more services than goods
D. Service firms require fewer employees
2. A company increases the number of identical products produced per hour while maintaining
quality. This is primarily an improvement in:
A. Output
B. Productivity
C. Effectiveness
D. Marketing efficiency
3. Which situation reflects high supply and low demand?
A. Prices drop because many similar products exist
B. Prices rise because many people want the product
C. Firms increase marketing to boost sales
D. Product availability is limited, raising price
4. A business that extracts minerals used by car manufacturers is classified as:
A. A service business
B. A goods-producing business
C. A nonprofit enterprise
D. A retail enterprise
5. An American company competing with lower-priced foreign goods is an example of:
A. Market segmentation
B. Total quality management
C. Global competition
D. Mass production
6. Which of the following BEST describes effectiveness?
A. Producing the most goods in the least time
B. Making correct decisions about products customers want
C. Reducing workforce to lower costs
D. Lowering product price while increasing sales
7. Total quality management (TQM) MOST emphasizes:
A. Using foreign suppliers for cheaper materials
B. Continuous improvement and teamwork
C. Increasing output regardless of cost
D. Eliminating all employee decision-making
8. Which innovation MOST transformed the relationship between businesses and customers by
enabling 24-hour access?
A. Mass production
B. Internet technology
C. Cellular communication
D. Assembly lines
9. A company redesigns its workflow by allowing groups of employees to manage entire
processes. This MOST clearly illustrates:
A. Re-engineering
B. Mass production
C. Downsizing
D. Marketing
10. A firm that reduces product variety and lays off workers to cut costs is engaging in:
A. Empowerment
B. Downsizing
C. Specialization
D. Output reduction
11. Which statement about the GDP is TRUE?
A. It includes illegal and off-record income
B. It measures only goods, not services
C. It excludes underground economy transactions
D. It decreases when population increases
12. Which is an example of the underground economy?
A. A bank not reporting interest earnings
B. A student paid cash for yard work
C. A company outsourcing labor
D. A small business franchising its brand
13. A person who buys the right to operate a business using another company’s name is a:
A. Franchisor
B. Franchisee
C. Entrepreneur
D. Manager
14. A major benefit of franchise ownership is:
A. Complete freedom to set prices
B. Guaranteed profits
C. Proven procedures and training
D. No legal or financial risk
15. Which is a risk of franchise ownership?
A. Limited access to national advertising
B. High failure rate compared to independent businesses
C. Requirement to buy supplies only from franchisor
D. No territorial protection
16. Which MOST strongly contributes to improved efficiency in a large business?
A. Increased marketing spending
B. Employee specialization
C. Higher product prices
D. Eliminating all technology
17. A firm that offers a high-quality product but produces it slowly is:
A. Effective but inefficient
B. Efficient but ineffective
C. Both effective and efficient
D. Neither effective nor efficient
18. Which BEST explains the decline of the old Kirk bicycle company (Case in Point)?
A. Excessive innovation and product variety
B. Refusal to adjust to changing competition and customer needs
C. Too much customer consultation
D. Excessive focus on low-cost foreign materials
19. Empowerment primarily helps a business by:
A. Reducing employee responsibilities
B. Increasing employee control over competitors
C. Enhancing quality and productivity
D. Eliminating the need for managers
20. Which factor MOST contributes to the popularity of small businesses?
A. Strict government controls
B. High capital needed to start a business
C. Ease of entry and limited start-up requirements
D. Guaranteed success during recessions