It is false that the setting of a short story includes time, place, cultural aspects, and characterization. Although the first part of the sentence is indeed correct, the last word is not - characterization has nothing to do with the setting. The setting is a character's surroundings - so the time the story is taking place in, the place, and all of the cultural aspects that the time and the place entail. The way characters are described doesn't have much to do with the setting.