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CHAPTER 1 What Is Business? 47
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True/False Questions c. The railroad era turned the U.S. into a
Please indicate if the following statements are true or unified market from coast to coast, lead-
false: ing to antitrust issues.
d. The assembly line era became incompati-
1. Business is global in nature.
ble with the formation of labor unions.
2. The goal of every business is to make a e. The post–World War II era started the age
profit. of globalization.
3. Profit is the difference between revenue and 3. The free market system is based on all of the
expenses. following except
4. When companies merge, the level of compe- a. the theory of supply and demand.
tition in the industry increases. b. the notion of private property.
5. The economic system followed by the United c. the freedom to choose and enter into and
States is called democratic socialism. exit out of industry.
6. The transition economies are economies that d. the assumption that the government
are moving away from a system of free mar- knows best.
kets toward greater government control of e. the notion of property rights.
productive assets. 4. The key issues that affect the market struc-
7. Business ethics is not an issue as long as ture include all of the following except
companies conduct business legally. a. the number of firms that operate in that
8. Selling products and services at a low price is industry.
more important than understanding con- b. the ease of entry into that industry.
sumer needs for business to be successful. c. the suppliers’ control over prices in that
industry.
9. It does matter whether business uses nomi-
d. the similarity of products or services in
nal GNI or PPP-based GNI to determine mar-
that industry.
ket potential in countries.
e. the ownership of businesses in the
10. The digital era is a fad and is unlikely to industry.
impact how business is conducted today or
5. Which of the following statements regarding
in the future.
the command economic system is not true?
Multiple-Choice Questions a. The government decides what, how much,
Choose the best answer. and at what price goods and services are
to be provided.
1. Peter Drucker defined business as organiza-
b. The government’s goal is to employ who-
tions that create
ever is willing to work.
a. profit. c. The government allocates resources
b. goods and services. efficiently.
c. risk. d. The government tries to minimize income
d. value for the customer. inequality.
e. revenue. e. Consumers have little say in the system.
2. Which of the following statements is not true 6. Which of the following is not a factor of pro-
about the U.S. economy? duction?
a. The Industrial Revolution transformed the a. Land and the natural resources beneath it
United States from an agrarian economy b. Labor, including entrepreneurs
to an industrial giant. c. Money and capital goods
b. The factory system led to specialization of d. Government regulations
labor. e. Technology
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