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.
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.
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.
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.
