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Business Essentials, 13e (Ebert/Griffin)
Chapter 1 The U.S. Business Environment
1) Which of the following best describes profit?
A) Total money taken in by a corporation
B) Increases in income from year to year
C) Increases in a corporation's stock price
D) Revenue generated by goods and services
E) Difference between revenues and expenses
Answer: E
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Application
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
2) Which of the following is defined as the environment where a firm conducts its operations and
derives its revenues known as?
A) Global business environment
B) Economic environment
C) Domestic business environment
D) Technological environment
E) Political-legal environment
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
3) Factors such as international trade agreements, economic conditions, and political unrest will
have the greatest impact on which type of business environment?
A) Global business environment
B) Economic environment
C) Domestic business environment
D) Technological environment
E) Political-legal environment
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.

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4) Changes in which type of business environment can reduce or replace the need for traditional
working methods, physical equipment, and other platforms needed to conduct business?
A) Global business environment
B) Economic environment
C) Domestic business environment
D) Technological environment
E) Political-legal environment
Answer: D
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
5) As a teenager, Melinda started cutting grass for her neighbor. She did a good job, and more
and more neighbors began to hire her. After saving money and investing in additional equipment,
Melinda began to earn an even greater profit. Which of the following did Melinda create when
she began cutting her neighbor's yard and earning income?
A) Nonprofit
B) Corporate culture
C) Market economy
D) Monopolistic competition
E) Business
Answer: E
Difficulty: Easy
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
6) In which way does consumer choice and demand affect the way a business operates?
A) Businesses must take into account what consumers want or need.
B) Businesses must produce most of the goods and services we consume.
C) Businesses must find opportunity and develop a plan to capitalize on it.
D) Business must prepare to compete in the global marketplace.
E) Business must use technology to track changing demographics in the community.
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.

3
7) Which of the following consists of everything outside an organization's boundaries that might
affect how the business operates?
A) Opportunities and enterprise
B) Corporate culture
C) External environment
D) Domestic business environment
E) Political-legal environment
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
8) Aimee wants to open her retail shop in her local community so that she can establish strong
relationships with suppliers and customers, and distinguish herself and her shop from the
competition. In which environment does Aimee wish to do business?
A) Global
B) Political-legal
C) Domestic
D) Economic
E) Technological
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
9) The Basic Broom Company orders much of its raw material from overseas markets, even
though the product is made locally. Which of the following business environments might prevent
The Basic Broom Company from being able to get its supply of raw material when they need it?
A) Changes in the global business environment
B) Changes in the technological environment
C) Changes in the economic environment
D) Changes in the factors of production
E) Changes in the labor force
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.

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10) Which of the following includes all the ways a firm creates value for their customers?
A) Technological environment
B) Profitability
C) Economic environment
D) Creation of a market economy
E) Law of supply and demand
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
11) Sally's Supply shop has recently had to change her process for shipping supplies because of
changes in government regulations. She now also has to change how she reports profit and loss,
and when those reports are processed. Which of the following is forcing these changes for Sally's
Supply shop
A) The laws of supply and demand
B) Political-legal environment
C) The establishment of perfect competition
D) Changes in the market economy
E) Economic environment
Answer: B
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
12) A new restaurant recently opened in the local community. It serves a variety of ethnic foods,
and plays background music in keeping with the customers and values of the local demographics
make up of the community. Which external environment of business is this restaurant
considering when they support the customs, values, and demographics of the local community?
A) Monopoly
B) Sociocultural
C) Freedom of choice
D) Perfect competition
E) Global
Answer: B
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.

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13) Which of the following include relevant conditions that exist such as wage rates, number of
people looking for jobs, and competition?
A) Global business environment
B) Technological environment
C) Political-legal environment
D) Sociocultural environment
E) Economic environment
Answer: E
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
14) Which of the following business environments includes the customers, mores, values, and
demographic characteristics of the society where the organization functions?
A) Sociocultural
B) Technological
C) Political-legal
D) Fiscal
E) Economic
Answer: A
Difficulty: Difficult
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
15) The pursuit of profits is how a business differs from organizations such as public
universities, public hospitals, and government agencies.
Answer: TRUE
Difficulty: Easy
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
16) An organization's external environment consists of everything outside of the organization
that might affect it.
Answer: TRUE
Difficulty: Easy
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.

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17) Businesses improve society by improving the quality of life in a society.
Answer: TRUE
Difficulty: Easy
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
18) The environment, not economic forces, play a major role in the success and failure of
businesses everywhere.
Answer: FALSE
Difficulty: Easy
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
19) The customs, values, and demographic characteristics of the society in which an organization
functions are the principal elements of the political-legal environment.
Answer: FALSE
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
20) The technological environment includes only electronics and telecommunications used to
perform business activities.
Answer: FALSE
Difficulty: Moderate
AACSB: Analytical thinking
Question Category: Application
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.

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21) Compare a sociocultural environment to an economic environment.
Answer: The sociocultural environment includes the customs, mores, values, and demographic
characteristics of the society in which an organization functions. Sociocultural processes also
determine the goods and services, as well as the standards of business conduct, that a society is
likely to value and accept. The economic environment refers to relevant conditions that exist in
the economic system in which a company operates. For example, if an economy is doing well
enough that most people have jobs and wages are high, a growing company may find it
necessary to pay even higher wages and offer more benefits to attract workers from other
companies. But if many people in an economy are looking for jobs, a firm may be able to pay
less and offer fewer benefits.
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Critical Thinking
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
22) Describe the domestic business environment.
Answer: The domestic business environment refers to the environment in which a firm
conducts its operations and derives its revenues. In general, businesses seek to be close to their
customers, to establish strong relationships with their suppliers, and to distinguish themselves
from their competitors.
Difficulty: Easy
AACSB: Application of knowledge
Question Category: Application
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
23) How do consumer choice and demand affect a capitalistic system?
Answer: In a capitalistic system, such as that in the United States, businesses exist to earn
profits for owners. Within certain broad constraints, an owner is free to set up a new business,
grow that business, sell it, or even shut it down. But consumers also have freedom of choice. In
choosing how to pursue profits, businesses must take into account what consumers want or need.
No matter how efficient a business is, it won't survive if there is no demand for its goods or
services.
Difficulty: Easy
AACSB: Application of knowledge
Question Category: Application
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.

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24) What are the benefits of business for society?
Answer: Businesses produce most of the goods and services we consume, and they employ
most working people. They create most innovations and provide a vast range of opportunities for
new businesses, which serve as their suppliers. A healthy business climate also contributes to the
quality of life and standard of living of people in a society. Business profits enhance the personal
incomes of millions of owners and stockholders, and business taxes help to support governments
at all levels. Many businesses support charities and provide community leadership.
Difficulty: Easy
AACSB: Application of knowledge
Question Category: Application
LO: 1.1: Define the nature of U.S. business, describe the external environments of business,
and discuss how these environments affect the success or failure of organizations.
25) What is the general term for resources used by a business to produce a good or service
referred to as?
A) Labor
B) Human Resources
C) Human capital
D) Factors of production
E) Economic systems
Answer: D
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
26) Which of the following denotes a nation's basis for allocating its resources among its
citizens?
A) Capital structure
B) Economic system
C) Ownership processes
D) Distribution network
E) National regulations
Answer: B
Difficulty: Easy
AACSB: Application of knowledge
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.

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27) Which of the following is the process for converting government enterprises into
individually owned firms?
A) Production allocation
B) Privatization
C) Entrepreneurship
D) Demand assessment
E) Profit maximization
Answer: B
Difficulty: Easy
AACSB: Application of knowledge
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
28) Which is the term for the physical and intellectual contributions of people while engaged in
the production of goods and services?
A) Human resources
B) Working capital
C) Physical resources
D) Planned resources
E) Market resources
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
29) Who is described as the person who accepts the risks and opportunities inherent in a new
business opportunity?
A) Capital managers
B) Entrepreneurs
C) Human resources
D) Home country economic systems managers
E) Information technology managers
Answer: B
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Application
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.

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30) What factor of production is used to generate forecasts based on specialized knowledge and
economic data?
A) Economic resources
B) Labor
C) Information resources
D) Entrepreneurs
E) Physical resources
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Application
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
31) When making decisions about production and allocation, which type of system depends on
individual producers and consumers to create a combination of supply and demand?
A) Planned economy
B) Communism
C) Private economy
D) Market economy
E) Socialism
Answer: D
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Analytical
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
32) The idea that individuals would contribute according to their abilities and receive benefits
according to their needs supports which type of economy?
A) Market economy
B) Socialist based economy
C) Mixed market economy
D) Capitalist market economy
E) Communist based economy
Answer: E
Difficulty: Moderate
AACSB: Analytical thinking
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.

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33) Which type of economy is the United States reflective of?
A) Planned
B) Mixed
C) Market
D) Private
E) Socialist
Answer: C
Difficulty: Moderate
AACSB: Analytical thinking
Question Category: Critical Thinking
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
34) What does a planned economy rely on a centralized government to do?
A) Support free enterprise in every way possible
B) Determine how to allocate all or most factors of production
C) Encourage citizens to buy shares of stock in small companies
D) Keep its control activities to a minimum
E) Direct workers to start their own small businesses
Answer: B
Difficulty: Moderate
AACSB: Analytical thinking
Question Category: Critical Thinking
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
35) Which economic system emphasizes the private ownership of most factors of production?
A) Socialism
B) Communism
C) Capitalism
D) Marxism
E) Federalism
Answer: C
Difficulty: Easy
AACSB: Analytical thinking
Question Category: Critical Thinking
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.

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36) In which type of economy do the individual producer and consumer control production
through supply and demand?
A) Planned
B) Communist
C) Market
D) Socialist
E) Mixed
Answer: C
Difficulty: Moderate
AACSB: Analytical thinking
Question Category: Critical Thinking
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
37) Which of the following marks the key difference between economic systems?
A) The way the factors of production are managed
B) The way goods are transported within their borders
C) The way rules and regulations are legislated
D) The way workers are relocated to different regions
E) The way basic necessities are determined
Answer: A
Difficulty: Moderate
AACSB: Analytical thinking
Question Category: Analytical
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
38) Which of the following represents the financial resources needed to operate a business?
A) Factors of production
B) Savings
C) Economy
D) Supply and demand
E) Capital
Answer: E
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.

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39) Kathleen has ordered new computers and office equipment of her tax preparation business.
She is also considered renting a larger office for next year? Which of the following refer to the
tangible things that Kathleen needs and uses to operate her business.
A) Technological environment
B) Private property
C) Business cycle
D) Physical resources
E) Capital
Answer: D
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
40) Which of the following refers to a reliance on a centralized government to allocate most
factors of production?
A) Market economy
B) Global business environment
C) Information resources
D) Planned economy
E) Sociocultural environment
Answer: D
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
41) Which of the following do most countries rely on in terms of economic systems?
A) Mixed market economy
B) Privatization
C) Market economies
D) Capitalism
E) Communism
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.

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42) Which of the following is a mechanism for exchange between buyers and sellers of specific
goods or services?
A) Market
B) Entrepreneurship
C) Communism
D) Capitalism
E) Free enterprise
Answer: A
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
43) Which of the following does a market economy depend on?
A) Profits
B) Freedom of choice
C) Economic restrictions
D) Competition
E) Privatization
Answer: B
Difficulty: Difficult
AACSB: Application of knowledge
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
44) Which of the following is the economic basis of the market process?
A) Profit and loss
B) Supply and demand
C) Planned and market economies
D) Labor and capital
E) Physical and technological resources
Answer: B
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.

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45) Which of the following is the underlying premise of a market economy?
A) A matured society
B) Direct ownership of factors of production
C) Creation of shared value
D) Centralized government
E) A political basis of the market process
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
46) Which of the following is the political basis of the market economy process?
A) Communism
B) Socialism
C) Capitalism
D) Planned economic support
E) Centralized governments
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
47) In which planned economic systems does the government own and operate selected major
industries and sources of production?
A) Mixed
B) Privatization
C) Socialism
D) Communism
E) Capitalism
Answer: C
Difficulty: Moderate
AACSB: Application of knowledge
Question Category: Concept
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.
48) Physical resources include the data and other information used by businesses.
Answer: FALSE
Difficulty: Easy
AACSB: Application of knowledge
Question Category: Application
LO: 1.2: Describe the different types of global economic systems according to the means by
which they control the factors of production.

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