1) Describe the five factors of production.
Answer:
1. Natural resources include land and raw materials that are found either below or above
the ground, such as soil, rocks, minerals, trees, fruits, and vegetables. Raw materials can
also include living organisms like fish or agricultural products such as milk and eggs.
2. Labour refers to workers. These are typically employees who contribute their talents
and strengths to create goods and services for the owners of a business.
3. Capital includes buildings, machines, tools, and other physical components used in
producing goods and services. Money from shareowners, however, is not capital. Money
can be used to purchase capital, but money is not capital itself. Money is only an
investment, since it cannot create or produce anything on its own to earn income.
4. Knowledge is another factor of production—in fact, it has become the most important
factor of production in today’s economy. The high-tech industry has created a need for
knowledge workers : individuals with specialized education, skills, training, and
experience. For many companies, knowledge is the key factor in achieving a competitive
advantage.
5. Entrepreneurs are individuals who establish a business in the pursuit of profit and to
serve a need in society. They are the owners, decision makers, and risk takers of the
business.Unlike their employees, entrepreneurs have no guarantee of income in return for
their time and effort.
Objective: LO1
2) Explain the type of economic system that exists in Canada.
Answer:
Canada’s economy is considered a mixed economy since it uses more than one economic
system. While most industries are the work of private enterprise, the Canadian
government may be considered partly socialist in its control of certain industries such as
Canada Post, utilities (for example, water), and some public lands. In Canada, for
example, the provincial governments control and regulate the health care system.
Similarly, the Ontario government owns and operates the Liquor Control Board of
Ontario (LCBO), which controls the sale of certain types of alcohol. Today, most
economies are considered mixed systems since governments usually play some role in
managing the economy.
Objective: LO2
3) What type of competition would the window industry fall under? Explain.
Answer:
The window industry would fall under the category of monopolistic competition. In
monopolistic competition, a large number of companies compete with one another,
Test Bank for Karakowsky and Guriel, The Context of Business, 1e
Copyright © 2015 Pearson Canada Inc. 1
Answer:
1. Natural resources include land and raw materials that are found either below or above
the ground, such as soil, rocks, minerals, trees, fruits, and vegetables. Raw materials can
also include living organisms like fish or agricultural products such as milk and eggs.
2. Labour refers to workers. These are typically employees who contribute their talents
and strengths to create goods and services for the owners of a business.
3. Capital includes buildings, machines, tools, and other physical components used in
producing goods and services. Money from shareowners, however, is not capital. Money
can be used to purchase capital, but money is not capital itself. Money is only an
investment, since it cannot create or produce anything on its own to earn income.
4. Knowledge is another factor of production—in fact, it has become the most important
factor of production in today’s economy. The high-tech industry has created a need for
knowledge workers : individuals with specialized education, skills, training, and
experience. For many companies, knowledge is the key factor in achieving a competitive
advantage.
5. Entrepreneurs are individuals who establish a business in the pursuit of profit and to
serve a need in society. They are the owners, decision makers, and risk takers of the
business.Unlike their employees, entrepreneurs have no guarantee of income in return for
their time and effort.
Objective: LO1
2) Explain the type of economic system that exists in Canada.
Answer:
Canada’s economy is considered a mixed economy since it uses more than one economic
system. While most industries are the work of private enterprise, the Canadian
government may be considered partly socialist in its control of certain industries such as
Canada Post, utilities (for example, water), and some public lands. In Canada, for
example, the provincial governments control and regulate the health care system.
Similarly, the Ontario government owns and operates the Liquor Control Board of
Ontario (LCBO), which controls the sale of certain types of alcohol. Today, most
economies are considered mixed systems since governments usually play some role in
managing the economy.
Objective: LO2
3) What type of competition would the window industry fall under? Explain.
Answer:
The window industry would fall under the category of monopolistic competition. In
monopolistic competition, a large number of companies compete with one another,
Test Bank for Karakowsky and Guriel, The Context of Business, 1e
Copyright © 2015 Pearson Canada Inc. 1
