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attributed to OpenStax, Rice University and any changes must be noted.
Chapter 1 UNDERSTANDING ECONOMIC SYSTEMS AND BUSINESS
TRUE-FALSE QUESTIONS
Title: ANSWER: T REFERENCE: The Nature of Business LEARNING OUTCOME: 1
1. A business is an organization that strives for a profit by providing goods and services desired by its
customers.
a. True
b. False
Title: ANSWER: F REFERENCE: The Nature of Business LEARNING OUTCOME: 1 RATIONALE: The major
difference is tangibility
2. The major difference between a good and a service is how the producer uses the factors of production
to create each.
a. True
b. False
Title: ANSWER: F REFERENCE: The Nature of Business LEARNING OUTCOME: 1 RATIONALE: Not-for-profit
organizations exist to achieve some goal other than profit.
3. Not-for-profit organizations have the same goals as for-profit organizations.
a. True
b. False
Title: ANSWER: T REFERENCE: The Nature of Business LEARNING OUTCOME: 1
4. Factors of production are common to all productive activities, regardless of the economic system.
a. True
b. False
Title: ANSWER: F REFERENCE: The Nature of Business LEARNING OUTCOME: 1 RATIONALE: Labor is the
economic contribution of the people.
5. Labor, as a factor of production, relates only to the production of manufactured goods; services are not
included.
a. True
b. False
Title: ANSWER: F REFERENCE: The Nature of Business LEARNING OUTCOME: 1 RATIONALE: Capital is all the
inputs used to produce goods and services and get them to the customer.
6. As a factor of production, capital includes money.
a. True
b. False
Title: ANSWER: T REFERENCE: The Nature of Business LEARNING OUTCOME: 1
7. People who combine natural resources, labor, and capital in a profitable venture are called
entrepreneurs.
a. True
b. False
Title: ANSWER: T REFERENCE: The Nature of Business LEARNING OUTCOME: 1
8. Many people consider knowledge to be a fifth factor of production.
,a. True
b. False
Title: ANSWER: T REFERENCE: Understanding the Business Environment LEARNING OUTCOME: 2
9. Business owners and managers have a great deal of control over the internal environment of business,
which covers the day-to-day business decisions.
a. True
b. False
Title: ANSWER: F REFERENCE: Understanding the Business Environment LEARNING OUTCOME: 2
RATIONALE: No one business is large enough or powerful enough to create major changes in the external
environment.
10. Some global corporations are large enough to create major changes in the external environment.
a. True
b. False
Title: ANSWER: F REFERENCE: Demographic Factors LEARNING OUTCOME: 2 RATIONALE: Demography is
the study of people's vital statistics.
11. Demography is the study of how people use their free time, how people integrate their hobbies and
their vocations, and how people make their purchase decisions.
a. True
b. False
Title: ANSWER: T REFERENCE: Demographic Factors LEARNING OUTCOME: 2
12. The term Generation X refers to people born between 1965 and 1980.
a. True
b. False
Title: ANSWER: T REFERENCE: Demographic Factors LEARNING OUTCOME: 2 RATIONALE: Baby boomers
are Americans that are retiring or near-retirement age. Most are vital contributors to the U.S.'s economy.
13. Baby boomers are Americans that are retiring or near-retirement age.
a. True
b. False
Title: ANSWER: T REFERENCE: Social Factors LEARNING OUTCOME: 2
14. Social factors influence what, how, where, and when to purchase products or services.
a. True
b. False
Title: ANSWER: F REFERENCE: How Business and Economies Work LEARNING OUTCOME: 3 RATIONALE:
Economics is the study of how a society uses scarce resources to produce and distribute goods and
services.
15. Economics is the study of a society’s financial institutions.
a. True
b. False
Title: ANSWER: F REFERENCE: Microeconomics and Macroeconomics LEARNING OUTCOME: 3
RATIONALE: Microeconomics focuses on individual parts of the economy.
October 22, 2018 2
,16. When Raoul Welsh is evaluating the construction industry in terms of interest rates, employment
cycles, and the rate of new home building nationwide, he is looking at microeconomics.
a. True
b. False
Title: ANSWER: F REFERENCE: Striving for Economic Growth LEARNING OUTCOME: 4 RATIONALE: A decline
in GDP that lasts for at least two consecutive quarters is a recession.
17. It takes four consecutive quarters of decline in the GDP for economists to consider the economy to be
in a recession.
a. True
b. False
Title: ANSWER: T REFERENCE: Keeping People on the Job LEARNING OUTCOME: 4
18. Full employment means 94-96 percent of the working force is employed.
a. True
b. False
Title: ANSWER: F REFERENCE: Types of Unemployment LEARNING OUTCOME: 4 RATIONALE: Lewis is
frictionally unemployed.
19. Tyron Lewis has recently quit his job in the administrative offices at the nearby hospital and is currently
seeking a retail management position. He would be described as structurally unemployed.
a. True
b. False
Title: ANSWER: T REFERENCE: Types of Unemployment LEARNING OUTCOME: 4
20. Freida Bida lost her job as a result of a recession and would be described as experiencing cyclical
unemployment.
a. True
b. False
Title: ANSWER: T REFERENCE: Types of Unemployment LEARNING OUTCOME: 4
21. Belinda Asher works in a vegetable processing plant and is out of work about six months a year due to
the periodic harvest times. She can be described as seasonally unemployed.
a. True
b. False
Title: ANSWER: T REFERENCE: Keeping Prices Steady LEARNING OUTCOME: 4
22. The situation in which the average of all prices of products is rising is called inflation.
a. True
b. False
Title: ANSWER: T REFERENCE: Types of Inflation LEARNING OUTCOME: 4
23. An increase in the price of crude oil could trigger cost-push inflation.
a. True
b. False
Title: ANSWER: F REFERENCE: Monetary Policy LEARNING OUTCOME: 5 RATIONALE: Monetary policy
controls the amount of money in circulation.
October 22, 2018 3
, 24. Monetary policy deals with tax revenues and expenditures at the national level.
a. True
b. False
Title: ANSWER: F REFERENCE: Monetary Policy LEARNING OUTCOME: 5 RATIONALE: The Federal Reserve is
the central banking unit of the U.S.
25. The Federal Reserve System can print money and raise taxes.
a. True
b. False
Title: ANSWER: T REFERENCE: Fiscal Policy LEARNING OUTCOME: 5
26. When Congress passes a law to raise individual tax rates, it is creating fiscal policy.
a. True
b. False
Title: ANSWER: T REFERENCE: Fiscal Policy LEARNING OUTCOME: 5
27. The national debt is the accumulation of deficits that have occurred in the past as a result of
expenditures exceeding tax revenues.
a. True
b. False
Title: ANSWER: F REFERENCE: Microeconomics: Zeroing on Business and Consumers LEARNING OUTCOME:
6 RATIONALE: Typically, the higher the price, the lower demand is.
28. The higher the price of a good or service, the greater the quantity demanded.
a. True
b. False
Title: ANSWER: T REFERENCE: Microeconomics: Zeroing on Business and Consumers LEARNING OUTCOME:
6
29. The higher the price of a good or service, the greater the amount a producer is willing to supply.
a. True
b. False
Title: ANSWER: T REFERENCE: Microeconomics: Zeroing on Business and Consumers LEARNING OUTCOME:
6
30. At the equilibrium point, quantity demanded equals quantity supplied.
a. True
b. False
Title: ANSWER: F REFERENCE: Competing in a Free Market LEARNING OUTCOME: 7 RATIONALE: This would
be an example of pure competition.
31. A farmer’s market where sixty farmers come weekly to sell the produce they grow in their gardens is an
example of monopolistic competition.
a. True
b. False
Title: ANSWER: F REFERENCE: Competing in a Free Market LEARNING OUTCOME: 7 RATIONALE: Public
utilities are examples of pure monopolies.
October 22, 2018 4
attributed to OpenStax, Rice University and any changes must be noted.
Chapter 1 UNDERSTANDING ECONOMIC SYSTEMS AND BUSINESS
TRUE-FALSE QUESTIONS
Title: ANSWER: T REFERENCE: The Nature of Business LEARNING OUTCOME: 1
1. A business is an organization that strives for a profit by providing goods and services desired by its
customers.
a. True
b. False
Title: ANSWER: F REFERENCE: The Nature of Business LEARNING OUTCOME: 1 RATIONALE: The major
difference is tangibility
2. The major difference between a good and a service is how the producer uses the factors of production
to create each.
a. True
b. False
Title: ANSWER: F REFERENCE: The Nature of Business LEARNING OUTCOME: 1 RATIONALE: Not-for-profit
organizations exist to achieve some goal other than profit.
3. Not-for-profit organizations have the same goals as for-profit organizations.
a. True
b. False
Title: ANSWER: T REFERENCE: The Nature of Business LEARNING OUTCOME: 1
4. Factors of production are common to all productive activities, regardless of the economic system.
a. True
b. False
Title: ANSWER: F REFERENCE: The Nature of Business LEARNING OUTCOME: 1 RATIONALE: Labor is the
economic contribution of the people.
5. Labor, as a factor of production, relates only to the production of manufactured goods; services are not
included.
a. True
b. False
Title: ANSWER: F REFERENCE: The Nature of Business LEARNING OUTCOME: 1 RATIONALE: Capital is all the
inputs used to produce goods and services and get them to the customer.
6. As a factor of production, capital includes money.
a. True
b. False
Title: ANSWER: T REFERENCE: The Nature of Business LEARNING OUTCOME: 1
7. People who combine natural resources, labor, and capital in a profitable venture are called
entrepreneurs.
a. True
b. False
Title: ANSWER: T REFERENCE: The Nature of Business LEARNING OUTCOME: 1
8. Many people consider knowledge to be a fifth factor of production.
,a. True
b. False
Title: ANSWER: T REFERENCE: Understanding the Business Environment LEARNING OUTCOME: 2
9. Business owners and managers have a great deal of control over the internal environment of business,
which covers the day-to-day business decisions.
a. True
b. False
Title: ANSWER: F REFERENCE: Understanding the Business Environment LEARNING OUTCOME: 2
RATIONALE: No one business is large enough or powerful enough to create major changes in the external
environment.
10. Some global corporations are large enough to create major changes in the external environment.
a. True
b. False
Title: ANSWER: F REFERENCE: Demographic Factors LEARNING OUTCOME: 2 RATIONALE: Demography is
the study of people's vital statistics.
11. Demography is the study of how people use their free time, how people integrate their hobbies and
their vocations, and how people make their purchase decisions.
a. True
b. False
Title: ANSWER: T REFERENCE: Demographic Factors LEARNING OUTCOME: 2
12. The term Generation X refers to people born between 1965 and 1980.
a. True
b. False
Title: ANSWER: T REFERENCE: Demographic Factors LEARNING OUTCOME: 2 RATIONALE: Baby boomers
are Americans that are retiring or near-retirement age. Most are vital contributors to the U.S.'s economy.
13. Baby boomers are Americans that are retiring or near-retirement age.
a. True
b. False
Title: ANSWER: T REFERENCE: Social Factors LEARNING OUTCOME: 2
14. Social factors influence what, how, where, and when to purchase products or services.
a. True
b. False
Title: ANSWER: F REFERENCE: How Business and Economies Work LEARNING OUTCOME: 3 RATIONALE:
Economics is the study of how a society uses scarce resources to produce and distribute goods and
services.
15. Economics is the study of a society’s financial institutions.
a. True
b. False
Title: ANSWER: F REFERENCE: Microeconomics and Macroeconomics LEARNING OUTCOME: 3
RATIONALE: Microeconomics focuses on individual parts of the economy.
October 22, 2018 2
,16. When Raoul Welsh is evaluating the construction industry in terms of interest rates, employment
cycles, and the rate of new home building nationwide, he is looking at microeconomics.
a. True
b. False
Title: ANSWER: F REFERENCE: Striving for Economic Growth LEARNING OUTCOME: 4 RATIONALE: A decline
in GDP that lasts for at least two consecutive quarters is a recession.
17. It takes four consecutive quarters of decline in the GDP for economists to consider the economy to be
in a recession.
a. True
b. False
Title: ANSWER: T REFERENCE: Keeping People on the Job LEARNING OUTCOME: 4
18. Full employment means 94-96 percent of the working force is employed.
a. True
b. False
Title: ANSWER: F REFERENCE: Types of Unemployment LEARNING OUTCOME: 4 RATIONALE: Lewis is
frictionally unemployed.
19. Tyron Lewis has recently quit his job in the administrative offices at the nearby hospital and is currently
seeking a retail management position. He would be described as structurally unemployed.
a. True
b. False
Title: ANSWER: T REFERENCE: Types of Unemployment LEARNING OUTCOME: 4
20. Freida Bida lost her job as a result of a recession and would be described as experiencing cyclical
unemployment.
a. True
b. False
Title: ANSWER: T REFERENCE: Types of Unemployment LEARNING OUTCOME: 4
21. Belinda Asher works in a vegetable processing plant and is out of work about six months a year due to
the periodic harvest times. She can be described as seasonally unemployed.
a. True
b. False
Title: ANSWER: T REFERENCE: Keeping Prices Steady LEARNING OUTCOME: 4
22. The situation in which the average of all prices of products is rising is called inflation.
a. True
b. False
Title: ANSWER: T REFERENCE: Types of Inflation LEARNING OUTCOME: 4
23. An increase in the price of crude oil could trigger cost-push inflation.
a. True
b. False
Title: ANSWER: F REFERENCE: Monetary Policy LEARNING OUTCOME: 5 RATIONALE: Monetary policy
controls the amount of money in circulation.
October 22, 2018 3
, 24. Monetary policy deals with tax revenues and expenditures at the national level.
a. True
b. False
Title: ANSWER: F REFERENCE: Monetary Policy LEARNING OUTCOME: 5 RATIONALE: The Federal Reserve is
the central banking unit of the U.S.
25. The Federal Reserve System can print money and raise taxes.
a. True
b. False
Title: ANSWER: T REFERENCE: Fiscal Policy LEARNING OUTCOME: 5
26. When Congress passes a law to raise individual tax rates, it is creating fiscal policy.
a. True
b. False
Title: ANSWER: T REFERENCE: Fiscal Policy LEARNING OUTCOME: 5
27. The national debt is the accumulation of deficits that have occurred in the past as a result of
expenditures exceeding tax revenues.
a. True
b. False
Title: ANSWER: F REFERENCE: Microeconomics: Zeroing on Business and Consumers LEARNING OUTCOME:
6 RATIONALE: Typically, the higher the price, the lower demand is.
28. The higher the price of a good or service, the greater the quantity demanded.
a. True
b. False
Title: ANSWER: T REFERENCE: Microeconomics: Zeroing on Business and Consumers LEARNING OUTCOME:
6
29. The higher the price of a good or service, the greater the amount a producer is willing to supply.
a. True
b. False
Title: ANSWER: T REFERENCE: Microeconomics: Zeroing on Business and Consumers LEARNING OUTCOME:
6
30. At the equilibrium point, quantity demanded equals quantity supplied.
a. True
b. False
Title: ANSWER: F REFERENCE: Competing in a Free Market LEARNING OUTCOME: 7 RATIONALE: This would
be an example of pure competition.
31. A farmer’s market where sixty farmers come weekly to sell the produce they grow in their gardens is an
example of monopolistic competition.
a. True
b. False
Title: ANSWER: F REFERENCE: Competing in a Free Market LEARNING OUTCOME: 7 RATIONALE: Public
utilities are examples of pure monopolies.
October 22, 2018 4
