Test Prep Week 9

In what stage of a product's life cycle would a company spend the least amount of money on promoting the product?

• decline

• maturity

• growth

• introduction

Answer explanation

Declining. In the declining stage, newer products are entering the market, taking the place of existing ones. Companies may slow or stop production, and they do not invest heavily in promotion. In the growth stage, promotions become competitive so that the company's share of the market will increase. The introductory stage is the introduction of the new product to the market. Maturity is the stage in which the product is well established.

A company starts marketing its workout clothes as everyday wear. This is an example of __________ innovation.

• process

• positioning

• product

• paradigm

Answer explanation

Positioning. Positioning innovation occurs when the purpose of a product is changed. The product itself remains the same, but it is marketed differently. In other words, the company focuses on changing the customer's perception of its product. Product innovation occurs when a business either creates or improves a product. Process innovation focuses on how something is done. Paradigm innovation occurs when there is a significant change in thinking.

One way that the gross domestic product (GDP) can be increased is by

• increasing labor and capital resources

• creating a trade deficit

• having imports exceed exports

• decreasing levels of productivity

Answer explanation

Increasing labor and capital resources. Labor and capital combine to produce goods and services. If more equipment and workers are added, production should increase, which increases the gross domestic product (GDP). Importing more goods and services than are exported creates a trade deficit, which has a negative effect on GDP. Decreasing productivity would decrease the GDP.

A local hardware store purchased a large shipment of snow shovels in November in order to prepare for winter weather. The hardware store is helping to create __________ utility.

• form

• place

• time

• possession

Answer explanation

Time. Time utility is created when products are available at the time they are needed or wanted by customers. Form utility is usefulness created by altering or changing the form or shape of a good to make it more useful to customers. Place utility is usefulness created by making sure that goods and services are available at the place where they are needed or wanted by customers. Possession utility is usefulness created when ownership of a product is transferred from the seller to the user.

What is the purpose of a code of ethics?

• To provide punishments for those who break rules

• To limit the work that accountants do

• To act as a framework for ethical decision-making

• To differentiate between different types of accounting

Answer explanation

To act as a framework for ethical decision-making. A code of ethics can supplement the rules and act as a framework for ethical decision-making. Codes of ethics help accountants figure out what ethics look like in different situations. Codes of ethics do not provide punishments for those who break rules, limit the work that accountants can do, or differentiate between different types of accounting.