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1. (p. 4) Any organization that produces a good or service can be classified as a business.
2. (p. 4) Businesses seek to earn a profit by providing goods and services to others.
3. (p. 4) Revenue is the amount a business earns above and beyond what it spends for expenses and costs.
4. (p. 4) Profit is the amount of money a business earns above and beyond what it spends for salaries and other
expenses.
5. (p. 4) Since all businesses make a profit, starting a business is not risky.
6. (p. 4) An entrepreneur is a person who risks time and money to start and manage a business.
7. (p. 4) A manager is an individual who assumes the risk of starting a business.
8. (p. 4) If a business’s costs and expenses are greater than its revenue, it will suffer a loss.
9. (p. 4) Profits of a business include the salaries paid to the owners and employees of that business.
10. (p. 4) Revenue is the total amount of money a business takes in during a given period by selling goods and
services.
11. (p. 4) Approximately 500,000 businesses in the United States close each year.
12. (p. 4) Risk is the chance a manager takes of losing time and money on a business that may not prove
profitable.
13. (p. 5) The United States has one of the highest standards of living in the world.
14. (p. 5) The term “standard of living” refers to the amount of debt people can incur on a given income.
15. (p. 5) Health care availability, a clean environment, and good schools all contribute to a high quality of life.
16. (p. 5) Maintaining a high quality of life requires the combined efforts of businesses, nonprofit organizations,
and government agencies.
17. (p. 5) “Stakeholders” refers only to the owners of a business.
18. (p. 5-6) Stakeholders are affected by the products, policies, and practices of businesses.
19. (p. 5) Stakeholders are all the people who stand to gain or lose by the policies and activities of a business.
20. (p. 5) Stakeholders include customers, employees, stockholders, suppliers, dealers, bankers, government
officials and environmentalists.
21. (p. 5-6) By balancing the demands of customers and stockholders, businesses have actually satisfied the
demands of all stakeholders.
22. (p. 6, figure 1.1) Often the needs of a firm’s various stakeholders will conflict.
23. (p. 6) Outsourcing means selling goods and services to people in other countries.
24. (p. 6) Outsourcing may allow overseas companies to use the information outsourced to produce competitive
products.
25. (p. 6) “Insourcing” refers to the practice of global companies setting up design and production facilities in the
United States.
26. (p. 7) The knowledge and skills learned in business courses are seldom relevant to students who work for
nonprofit organizations or volunteer groups.
27. (p. 7) Businesses and nonprofit organizations often strive to accomplish the same objectives.
28. (p. 7) Nonprofit organizations use financial gains to meet stated social or educational goals of the organization
rather than personal profit.
29. (p. 7) Social entrepreneurs are people who start and manage organizations that are not-for-profit and help
countries with their social issues.
30. (p. 7) Ashoka is a group that seeks out social entrepreneurs and creates a network among them so that they can
learn from one another.
31. (p. 4) Robin has started her own Internet consulting firm. While she recognizes the risks involved in operating
a business, she is still willing to invest her time, effort, and money in hopes of earning a profit. Robin is an
example of an entrepreneur.
32. (p. 4) The only purpose of business is to make money for entrepreneurs.
33. (p. 4) The only way a firm can increase its profits is to increase its sales revenue.
34. (p. 4) The amount of profit or loss earned by a business can be found by subtracting the firm’s expenses from
its revenues.
35. (p. 4) The Buckmaker Corporation generated total revenues of $30 million while incurring expenses of $17
million. During the year Buckmaker earned a profit of $13 million.
36. (p. 5) Since businesses strive to earn a profit, they benefit their owners at the expense of the rest of society.
37. (p. 5) John earns the same amount of money this year as he did last year. Thus, his standard of living must be
the same as it was last year.
39. (p. 5) Political freedom, quality education, access to health care, and a clean environment are all factors that
contribute to an improved quality of life.
40. (p. 5) People living in the nation of Carpozia earn more money than people living in the country of Wagonia.
This will result in the citizens of Carpozia enjoying a higher standard of living than the citizens of Wagonia.
41. (p. 5) The major difference between businesses and nonprofit organizations is that only businesses can
increase the standard of living, while only nonprofit organizations can improve the quality of life.
42. (p. 5-6) Business decisions should consider the interests of customers, employees, suppliers, government
leaders, and stockholders.
43. (p. 6) An effort to please one group of stakeholders eventually pleases all stakeholders.
44. (p. 6) Insourcing creates many new jobs, and helps offset the number of jobs being outsourced.
45. (p. 7) A charitable organization, such as the Red Cross or Salvation Army, is best classified as a small
business.
46. (p. 7) Nonprofit organizations are similar to businesses in that they often provide goods and services that
satisfy the needs of society.
47. (p. 7) Unlike businesses, employees of nonprofit organizations are not required to learn the business skills of
information management, marketing, or financial management.
48. (p. 8) Starting a business is a riskier path toward business success than working your way up the ranks of a
large business.
49. (p. 8) Working as an entrepreneur is the only way to succeed in business.
50. (p. 8) Paid vacations and health care insurance are among the benefits provided by the government to
entrepreneurs.
51. (p. 8-9) Women currently own less than ten percent of all businesses.
52. (p. 8) The number of businesses owned by Asians, Hispanics, and American Indians has grown dramatically.
53. (p. 9) Land, sometimes called natural resources, is the most critical factor of production in explaining why
some countries are poor while others are rich.
54. (p. 9, figure 1.2) Money is one of the five factors of production that contribute to the creation of wealth.
55. (p. 9, figure 1.2) Tools, machinery, and buildings are all types of capital resources.
56. (p. 9-10) The major advantage rich nations have over poor nations is an abundance of land and labor.
57. (p. 9, figure 1.2) Entrepreneurship is one of the five factors of production that contribute to the creation of
wealth.
58. (p. 9) Business consultant Peter Drucker says that the most important factor of production is knowledge.
59. (p. 10) The two factors of production that are the most important for creating wealth are entrepreneurship and
the effective use of knowledge.
60. (p. 10) Recent studies have found that the freer a country is, the wealthier its citizens are.
61. (p. 8-9) Jing is a recent college graduate who is interested in starting her own business. If she does so, she will
be a pioneer, because relatively few women choose to start their own firms.
62. (p. 10) Countries with an inadequately trained work force and few entrepreneurs often achieve the highest
levels of income by relying on a large number of workers.
63. (p. 10) If they wish to create more wealth, poor nations should focus on policies that increase entrepreneurship
and the effective use of knowledge.
64. (p. 10) The business environment refers to the surrounding factors that either help or hinder the development
of businesses.
65. (p. 11) Well-managed businesses will grow and prosper regardless of the business environment in which they
operate.
66. (p. 11, figure 1.3) Taxes and government regulations are part of the economic and legal environment in which
businesses operate.
67. (p. 11) High taxes and government restrictions help to encourage entrepreneurs by providing greater incentives
for people to work hard and create profit.
68. (p. 12) One of the best things the governments of developing countries can do to increase wealth is to
minimize interference with the free exchange of goods and services.
69. (p. 12) Countries that provide little or no government involvement provide the best environment for
competitive businesses.
70. (p. 12) In an effort to increase wealth and their country’s standard of living, many governments are taking over
major industries and operating them as nonprofit organizations.
71. (p. 12) Corruption and illegal activities are expected in a capitalist system and can be beneficial.
72. (p. 12) One way for a government to actively promote entrepreneurship is to establish a currency that’s
tradable in world markets so that you can buy and sell goods anywhere in the world using that currency.
73. (p. 12) Honesty, integrity, and high ethical standards are essential to a capitalist economic system like the one
that operates in the United States.
74. (p. 12) Laws that allow businesses to write enforceable contracts decrease the risk of doing business.
75. (p. 11) In rich countries such as the United States, changes in the level of taxation have little impact on the
incentives of entrepreneurs.
76. (p. 12) The corrupt and illegal activities of a few companies can negatively impact the entire U.S. business
community.
77. (p. 12) The government of the small nation of Bingland is trying to achieve a high quality of life by imposing
strict regulations to protect the environment and ensure safe working conditions in factories and mines. The
government also has established ambitious programs to help the poor, financing them by setting high tax rates.
These efforts by Bingland’s government should create an atmosphere that encourages entrepreneurship.
78. (p. 12) Though it has received a lot of attention, the development of the Internet has had less of an impact on
the way businesses operate than many other technological changes.
79. (p. 13) An increase in productivity indicates that more can be produced in a given time period with the same
amount of resources.
80. (p. 13) Technology can help businesses become more efficient and productive.
81. (p. 13) Productivity is the amount of output you generate given the amount of input such as hours worked.
82. (p. 13) Effectiveness means producing goods and services using the least amount of resources.
83. (p. 13) Effectiveness means producing the desired result.
84. (p. 13) Technology affects people in most, but not all industries.
85. (p. 13) Technology affects people in all industries.
86. (p. 13) Technology refers to everything that makes business operations more efficient and productive.
87. (p. 14) E-commerce is the buying and selling of goods over the Internet.
88. (p. 14) The B2B internet market consists of selling goods and services to consumers.
89. (p. 14) The rise of Internet marketing came so fast and drew so much competition that many new Internet
companies failed.
90. (p. 14) Amazon faced increased competition by expanding the company’s offerings to include things like free
shipping.
91. (p. 14) Small companies cannot compete with large companies even when they use the Internet.
92. (p. 14) The business-to-business segment of e-commerce is smaller than the business-to-consumer segment of
e-commerce.
93. (p. 15) Technology allows firms to be more responsive to their customers’ wants and needs.
94. (p. 15) Bar codes can be used to tell retailers what product you bought, in what size and color, and at what
price.
95. (p. 15) Bar codes allow retailers to scan information about the products consumers buy directly into a
database.
96. (p. 15) An electronic storage file where information is kept is called a CPU.