,CHAPTER 1
What Is Business?
TRUE/FALSE
1. According to Peter Drucker, businesses are organizations that make a profit.
ANS: F REF: p. 5 OBJ: 1
2. The factory system is efficient in mass-producing large quantities of standardized goods.
ANS: T REF: p. 8 OBJ: 2
3. The law of demand states that consumers will buy less of a product or service when its
price rises.
ANS: T REF: p. 12 OBJ: 3
4. Aaron’s firm has reduced waste, trained staff to be highly productive, and cut costs. This
demonstrates that Aaron’s firm is becoming more efficient.
ANS: T REF: p. 15 OBJ: 4
5. Ironically, centrally-planned economies are more likely to experience acute shortages
and surpluses of goods than free market economies.
ANS: T REF: p. 18 OBJ: 5
6. Capital, one of the factors of production, consists of both money and durable goods.
ANS: T REF: p. 20 OBJ: 6
7. Last week, Genevieve’s bakery sold 10 cakes for $20 each. Genevieve’s total cost to
produce one cake is $10. Genevieve’s revenue for the week is $100.
ANS: F REF: p. 21 OBJ: 7
8. Peter van Stolk, founder of Jones Soda, develops offbeat flavors that appeal to teens,
who he knows are also interested in the Internet and extreme sports. Peter van Stolk has
a good understanding of his company’s target group.
ANS: T REF: p. 26 OBJ: 8
1-1
Introduction to Business / 4e. Copyright © 2024 Academic Media Solutions
,1-2 Part I The Nature of Contemporary Business
9. Nominal GNP measures the gross national product in current dollars, while real GNP
uses inflation-adjusted measures.
ANS: T REF: p. 30 OBJ: 9
10. The trend toward increased use of the Internet and e-commerce primarily favors
companies from wealthy, developed nations.
ANS: F REF: p. 32 OBJ: 10
MULTIPLE CHOICE
11. The United Way is a charitable, not-for-profit organization. Therefore, the United Way
a. is not a business.
b. cannot charge for its services.
c. does not have the goal of making a profit.
d. does not create value for those it serves.
e. has no revenue.
ANS: C REF: p. 5 OBJ: 1
12. Risk is associated with reward. Businesspeople take a calculated risk that their business
might fail in order to get a reward, which is
a. happy customers.
b. profit.
c. a sense of self-satisfaction.
d. employment.
e. a healthy economy.
ANS: B REF: p. 5 OBJ: 1
13. A laissez-faire system of government
a. is not compatible with capitalism.
b. protects the rights of workers and unions.
c. creates a lot of regulation on business.
d. strictly enforces antitrust legislation.
e. allows businesses to do what they please.
ANS: E REF: p. 8 OBJ: 2
Introduction to Business / 4e. Copyright © 2024 Academic Media Solutions
, Chapter 1 What Is Business? 1-3
14. Recently Microsoft Corporation was prosecuted by the U.S. and several state
governments for being too large and powerful, dominating the computer software
market, and engaging in anticompetitive tactics. Microsoft was found guilty of violating
laws.
a. antitrust
b. worker safety
c. not-for-profit
d. laissez-faire
e. international tariff
ANS: A REF: p. 8 OBJ: 2
15. The mass production assembly line was designed to
a. use fewer raw materials.
b. eliminate defects.
c. reduce production costs.
d. improve worker safety.
e. answer the demands of labor unions.
ANS: C REF: p. 9 OBJ: 2
16. Which of the following is not true about knowledge workers?
a. Knowledge workers are highly educated.
b. The number of knowledge workers in today’s global economy is increasing.
c. Knowledge workers are easily promoted to higher positions.
d. Knowledge workers are primarily employed in manufacturing.
e. Knowledge workers can easily transfer to other companies or countries.
ANS: D REF: p. 11 OBJ: 2
17. Which of the following occupations would you recommend to a person just entering the
workforce?
a. Administrative support
b. Agriculture
c. Production
d. Laborer
e. Knowledge technologists
ANS: E REF: p. 11 OBJ: 2
Introduction to Business / 4e. Copyright © 2024 Academic Media Solutions
What Is Business?
TRUE/FALSE
1. According to Peter Drucker, businesses are organizations that make a profit.
ANS: F REF: p. 5 OBJ: 1
2. The factory system is efficient in mass-producing large quantities of standardized goods.
ANS: T REF: p. 8 OBJ: 2
3. The law of demand states that consumers will buy less of a product or service when its
price rises.
ANS: T REF: p. 12 OBJ: 3
4. Aaron’s firm has reduced waste, trained staff to be highly productive, and cut costs. This
demonstrates that Aaron’s firm is becoming more efficient.
ANS: T REF: p. 15 OBJ: 4
5. Ironically, centrally-planned economies are more likely to experience acute shortages
and surpluses of goods than free market economies.
ANS: T REF: p. 18 OBJ: 5
6. Capital, one of the factors of production, consists of both money and durable goods.
ANS: T REF: p. 20 OBJ: 6
7. Last week, Genevieve’s bakery sold 10 cakes for $20 each. Genevieve’s total cost to
produce one cake is $10. Genevieve’s revenue for the week is $100.
ANS: F REF: p. 21 OBJ: 7
8. Peter van Stolk, founder of Jones Soda, develops offbeat flavors that appeal to teens,
who he knows are also interested in the Internet and extreme sports. Peter van Stolk has
a good understanding of his company’s target group.
ANS: T REF: p. 26 OBJ: 8
1-1
Introduction to Business / 4e. Copyright © 2024 Academic Media Solutions
,1-2 Part I The Nature of Contemporary Business
9. Nominal GNP measures the gross national product in current dollars, while real GNP
uses inflation-adjusted measures.
ANS: T REF: p. 30 OBJ: 9
10. The trend toward increased use of the Internet and e-commerce primarily favors
companies from wealthy, developed nations.
ANS: F REF: p. 32 OBJ: 10
MULTIPLE CHOICE
11. The United Way is a charitable, not-for-profit organization. Therefore, the United Way
a. is not a business.
b. cannot charge for its services.
c. does not have the goal of making a profit.
d. does not create value for those it serves.
e. has no revenue.
ANS: C REF: p. 5 OBJ: 1
12. Risk is associated with reward. Businesspeople take a calculated risk that their business
might fail in order to get a reward, which is
a. happy customers.
b. profit.
c. a sense of self-satisfaction.
d. employment.
e. a healthy economy.
ANS: B REF: p. 5 OBJ: 1
13. A laissez-faire system of government
a. is not compatible with capitalism.
b. protects the rights of workers and unions.
c. creates a lot of regulation on business.
d. strictly enforces antitrust legislation.
e. allows businesses to do what they please.
ANS: E REF: p. 8 OBJ: 2
Introduction to Business / 4e. Copyright © 2024 Academic Media Solutions
, Chapter 1 What Is Business? 1-3
14. Recently Microsoft Corporation was prosecuted by the U.S. and several state
governments for being too large and powerful, dominating the computer software
market, and engaging in anticompetitive tactics. Microsoft was found guilty of violating
laws.
a. antitrust
b. worker safety
c. not-for-profit
d. laissez-faire
e. international tariff
ANS: A REF: p. 8 OBJ: 2
15. The mass production assembly line was designed to
a. use fewer raw materials.
b. eliminate defects.
c. reduce production costs.
d. improve worker safety.
e. answer the demands of labor unions.
ANS: C REF: p. 9 OBJ: 2
16. Which of the following is not true about knowledge workers?
a. Knowledge workers are highly educated.
b. The number of knowledge workers in today’s global economy is increasing.
c. Knowledge workers are easily promoted to higher positions.
d. Knowledge workers are primarily employed in manufacturing.
e. Knowledge workers can easily transfer to other companies or countries.
ANS: D REF: p. 11 OBJ: 2
17. Which of the following occupations would you recommend to a person just entering the
workforce?
a. Administrative support
b. Agriculture
c. Production
d. Laborer
e. Knowledge technologists
ANS: E REF: p. 11 OBJ: 2
Introduction to Business / 4e. Copyright © 2024 Academic Media Solutions
