1. An entrepreneur is a person who risks time and money to start and manage a business. TRUE 2.

The term "standard of living" refers to the amount of debt people can incur on a given income. FALSE 3. The only way a firm can increase its profits is to increase its sales revenue. FALSE Profit is determined by subtracting expenses from revenue. Thus a firm with stable or even declining sales might be able to improve profits by reducing expenses. 4. Paid vacations and health care insurance are among the benefits provided by the government to entrepreneurs. FALSE 5. If they wish to create more wealth, poor nations should focus on policies that increase entrepreneurship and the effective use of knowledge. TRUE Poor nations often have plenty of labor and land, as well as access to capital. However, the absence of entrepreneurship and knowledgeable workers seems to be the reason that most poor countries remain poor. 6. Tools, machinery, and buildings are all types of capital resources. TRUE 7. The business environment refers to the surrounding factors that either help or hinder the development of businesses. TRUE
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Taxes and government regulations are part of the economic and legal environment in which businesses operate. TRUE 9. Countries that provide little or no government involvement provide the best environment for competitive businesses. TRUE 10.

Honesty, integrity, and high ethical standards are essential to a capitalist economic system like the one that operates in the United States. TRUE 11. An increase in productivity indicates that more can be produced in a given time period with the same amount of resources. TRUE 12. Productivity is the amount of output you generate given the amount of input such as hours worked. TRUE 13. E-commerce is the buying and selling of goods over the Internet. TRUE 14. The rise of Internet marketing came so fast and drew so much competition that many new Internet companies failed. TRUE 15. To remain competitive in today's market, firms must produce a quality product and offer outstanding service at a reasonable price. TRUE 16. Successful firms follow a customer-driven strategy, as opposed to the managementdriven strategy used in the past. TRUE 17. Empowerment means giving frontline workers the responsibility, authority, and freedom to respond quickly to customer requests. TRUE 18. Demographic changes create new business opportunities. TRUE 19. Businesses use demographic studies to understand where people live, their lifestyles, and what they are likely to buy. TRUE Demography is the statistical study of the human population to learn its size, density and

characteristics. Since many goods and services appeal to customers with specific demographic characteristics (such as age or income), studying demographic trends can help businesses determine whether the demand for a good is likely to rise or fall. 20. A powerful change in the global environment has been the increase in free trade among nations. TRUE 21. The threat of terrorism increases the costs of operating a business. TRUE 22. Lucy owns a restaurant in Los Angeles. She heard on the radio that the homeland security threat level has been increased due to anticipated terrorist activities, especially in large cities in the U.S. She will likely not be able to get insurance to cover any losses her business may suffer should an attack occur in L.A. TRUE Lucy's restaurant is located in a very large U.S. city. Firms have found it difficult to get insurance against terrorist attacks. 23. The advice provided by a marriage counselor is an example of the service industry. TRUE 24. The best employment strategy for today's college graduates is to search for jobs that are closely related to their college major. FALSE 25. After losing her manufacturing job in the U.S. automobile industry, Juanita has found that well paid service sector jobs require retraining and further education. TRUE High-paying service sector jobs can be found in health care, accounting, finance, entertainment, telecommunications, architecture, law, and software engineering. However, these jobs require specialized training and education.