II. Comprehension exercises

1. Complete the statements:

1. The activity of producing, distributing, and selling goods and services is

called

1. a business

2. businesses

3. business

2. A business is

a. some economic activity

b. a company or a firm which produces and sells goods or services

c. a nonprofit organization

3. Natural resources, capital, human resources, and entrepreneurs are

a. the four basic factors of production

b. the four basic factors of distribution

c. the four basic factors of sale

4. The production process always converts

a. outputs into inputs

b. inputs into outputs

c. goods into services

5. Tangible goods are products which are physical in nature, such as

a. transporting a passenger to a destination

b. an idea

c. steel car parts

6. In comparison with manufacturing, production is

a. a narrower term

b. a broader term

c. just the same as manufacturing

7. The process of moving products from the producer to the consumer is

known as

a. conversion

b. sale

c. distribution

8. Distribution channels, also known as marketing channels, are

a. an organization’s decisions about which combination of channels to use

b. an organized network of firms that work together to get goods and

services from producer to consumer

3. a firm’s overall plan for moving products to buyers

9. A product is

a. a good with tangible characteristics that is made to be sold

b. a service with intangible characteristics that a person or organization

performs for another person or organization

c. a good or service with tangible and intangible characteristics that provide

satisfaction and benefit

10. Manufacturing, construction, mining, and agriculture are the spheres of

activity of

1. service businesses

2. goods-producing businesses

3. nonprofit organizations

11. Service businesses include finance and insurance, transportation and

1. construction

2. medical care and computer programming

3. agriculture

12. The primary goal of all businesses is

a. to improve standards of living

b. to create new jobs

c. to earn a profit

13. If a company spends $4.00 to manufacture, finance, and distribute a

product that it sells for $4. 99, the business earns a profit of

1. 9 cents on each product sold

2. 99 cents on each product sold

3. $4.00 on each product sold

14. A good example of a nonprofit organization is

a. Ford Motor Company

b. McDonald’s

c. New York’s Metropolitan Museum of Art

15. Studying business can help you

a. better communicate with other people

b. make a fortune

c. develop skills and acquire knowledge to prepare for your future career

2. Say whether these statements are true or false.

1. Business is the activity of distributing and selling goods and services for a

profit.

2. Production is the transformation of resources into goods and services that

people want or need.

3. There are three basic factors of production: human resources, natural

resources, and entrepreneurs.

4. Natural resources include anyone who works to produce goods and

services, from the president of the company to a grocery clerk.

5. At the core of production is the conversion process through which input is

transformed into output – the desired or finished product.

6. For a shirt maker to produce a shirt, the resources that are converted –

cloth, thread, and buttons – are intangible and so is the output – the shirt.

7. All distribution channels are complex and involve many people and

organizations.

8. Goods are things that are made to be sold; they are physical objects you

can touch.

9. Washing machines, microwave ovens, and refrigerators can be classified

as goods.

10. Services are physical objects as well as goods.

11. Service businesses include manufacturing, construction, mining, and

agriculture.

12. Profit is the money that remains after all expenses and taxes have been

paid.

13. Business activities help generate the profits that are essential only to

individual businesses.

14. Not all organizations are businesses. Nonprofit organizations play

important roles in society by placing public service above profits.

15. Studying business can help you develop skills and acquire knowledge to

prepare for your future career only if you plan to work for a private

company.

3. Check your progress.

1. Explain what business is.

2. What does production involve? Name the four factors of production.

3. Explain the conversion process.

4. What is distribution? Explain what a distribution channel is.

5. How do goods differ from services? Differentiate between goods-producing

businesses and service businesses.

6. What is a profit? Why is this factor so important nowadays?

7. Do all organizations operate to earn a profit?

8. Why is it important to study business?