20 DSST Introduction to Business practice questions, with answers and video walkthroughs

Twenty practice questions for DSST Introduction to Business, in the real exam's style. Score 16 of 20 here and you are in passing range. Miss more than four, and the pattern of your misses points straight at the topic to review next. Every question below is explained on video, including why the wrong answers trap most test-takers.

When I took DSST Introduction to Business for my degree at Thomas Edison State University, the move that mattered was steady practice in the exam's format, with an explanation for every miss. Use these the same way: answer, check, and read why the wrong choices are tempting. For the full plan around them, see the DSST Introduction to Business pillar guide.

Watch the full video walkthrough above, then test yourself on the twenty questions below. Each one is explained on the video, including why the wrong answers trap most test-takers.

Questions 1 to 5 (questions 1 to 5)

1. A business owned and run by one person, who keeps all the profits but is personally liable for all the debts, is called a: Sole Proprietorship. A sole proprietorship has a single owner who keeps all profits but is personally responsible for every debt. It is the simplest and most common form of business in the United States.

2. The main legal advantage of forming a corporation, compared with a sole proprietorship, is: Limited Liability for Its Owners. A corporation is a separate legal entity, so its owners, the shareholders, risk only the money they invested. Their personal assets are shielded if the company fails, which is called limited liability.

3. In a free market economy, the prices of most goods and services are determined mainly by: Supply and Demand. In a market economy, prices settle where the quantity buyers want to buy meets the quantity sellers want to sell. That interaction of supply and demand, not a central authority, sets the price.

4. If the demand for a product rises while its supply stays the same, its price will most likely: Rise. When more buyers compete for the same limited supply, they bid the price up. Higher demand against unchanged supply pushes the market price higher until a new balance is reached.

5. The owners of a corporation, who hold shares of its stock, are called its: Shareholders. The people who buy shares of a corporation's stock own a piece of the company and are called shareholders, or stockholders. They elect the board of directors that oversees the firm.

Questions 6 to 10 (questions 6 to 10)

6. The fundamental accounting equation states that a company's assets are equal to its liabilities plus its: Owners' Equity. The accounting equation is assets equal liabilities plus owners' equity. Everything a company owns is financed either by what it owes to others or by the owners' stake in the business.

7. Money a company brings in from selling its goods or services, before any expenses are subtracted, is its: Revenue. Revenue is the total money a company takes in from sales before any costs are deducted. Subtract the expenses from revenue and what remains is the company's profit, or net income.

8. A rent payment that stays the same each month no matter how many units a factory produces is an example of a: Fixed Cost. A fixed cost does not change with the level of output, like monthly rent or insurance. A variable cost, such as raw materials, rises and falls with how much the company produces.

9. The financial statement that reports a company's revenues and expenses over a period of time to show its profit or loss is the: Income Statement. The income statement, also called the profit and loss statement, lists revenues and expenses over a period to reveal net profit or loss. The balance sheet instead shows what a firm owns and owes at one moment.

10. When a corporation raises money by selling bonds to investors, it is using: Debt Financing. Selling bonds means borrowing money that must be repaid with interest, which is debt financing. Selling stock instead raises money by giving up ownership, which is equity financing.

Questions 11 to 15 (questions 11 to 15)

11. The four basic functions of management are planning, organizing, leading, and: Controlling. The classic four functions of management are planning, organizing, leading, and controlling. Controlling means monitoring performance against the plan and making corrections where results fall short.

12. The marketing mix is traditionally described as the four P's: product, price, promotion, and: Place. The four P's of the marketing mix are product, price, promotion, and place. Place covers distribution: getting the product to where customers can actually buy it.

13. Dividing a broad market into smaller groups of buyers with similar needs is called market: Segmentation. Market segmentation splits a large market into groups of customers who share needs or traits, such as age or income. A company then targets the segments it can serve best.

14. A manager who oversees the process of turning raw materials and labor into finished goods is working in: Operations Management. Operations management, also called production management, runs the process that converts inputs like materials and labor into finished goods and services as efficiently as possible.

15. The management approach that empowers employees and focuses every department on continuously meeting customer expectations is known as: Total Quality Management. Total quality management makes quality the responsibility of everyone in the firm and aims at continuous improvement to satisfy customers. It treats quality as an ongoing process, not a final inspection.

Questions 16 to 20 (questions 16 to 20)

16. A sustained rise in the general level of prices across an economy, which reduces the buying power of money, is called: Inflation. Inflation is a general, ongoing increase in prices that erodes the purchasing power of money. As prices climb, each dollar buys a little less than it did before.

17. In the United States, the Federal Reserve is mainly responsible for: Controlling the Money Supply and Interest Rates. The Federal Reserve is the nation's central bank. It conducts monetary policy by adjusting the money supply and interest rates to keep prices stable and support employment.

18. Gross Domestic Product, or GDP, measures the: Total Value of All Goods and Services Produced in a Country. Gross domestic product is the total market value of all final goods and services a country produces in a year. It is the single most common measure of the size and health of an economy.

19. A tax placed on goods that are imported from another country is called a: Tariff. A tariff is a tax a government charges on imported goods, which raises their price and makes domestic products more competitive. A quota instead limits the quantity of imports allowed.

20. A business practiced by which one firm grants another the right to operate under its brand and system, like a fast-food chain selling locations to local owners, is called: Franchising. In franchising, a franchisor licenses its brand, products, and operating methods to a franchisee, who runs a local outlet. It is how chains like McDonald's expand quickly using other owners' investment.

What to do with your score

The point of twenty questions is not the twenty, it is the pattern. When I scored a practice set, I marked which topic each miss came from, then spent my next session on that topic alone. None of it requires starting over, only tightening the spots that cost you points.

A single twenty-question set is a snapshot, not a study plan. To pass with margin you need volume: enough questions, in the exam's format, with explanations that turn a wrong answer into a correction. That is what Flying Prep's DSST Introduction to Business practice is built for: every question explained, with a free trial before you decide.