Entrepreneurship:
Starting and Operating A
Small Business
Fifth Edition
Steve Mariotti
Caroline Glackin
Entrepreneurship: Starting
and Operating A Small
Business, Test Bank, 5e
Revised by Ramachandran
Subramanian

1
Entrepreneurship: Starting and Operating a Small Business, 5e (Glackin/NFTE)
Chapter 1 Entrepreneurs and Entrepreneurship
1) Products are tangible, meaning ________.
A) you can't actually touch them
B) you can sell them
C) you can touch them
D) you can see them
Answer: C
Diff: 1
Learning Objective: 1.1 Summarize what entrepreneurship is and what entrepreneurs do.
AACSB: Reflective Thinking
2) Entrepreneurs are often both owners and ________.
A) creditors
B) employees
C) customers
D) suppliers
Answer: B
Diff: 2
Learning Objective: 1.1 Summarize what entrepreneurship is and what entrepreneurs do.
AACSB: Reflective Thinking
3) A necessity-based entrepreneur starts a business to exploit a perceived opportunity or to
pursue one that they created.
Answer: FALSE
Diff: 1
Learning Objective: 1.1 Summarize what entrepreneurship is and what entrepreneurs do.
AACSB: Reflective Thinking
4) Explain how entrepreneurs can add value to scarce resources, and what signal they use to
determine whether or not they are succeeding in doing so.
Answer: A scarce resource is something of value that can be used to make something else or to
fill a need. The French economist Jean Baptiste Say wrote at the turn of the 19th century: "The
entrepreneur shifts economic resources [like wood or coal] out of an area of lower and into an
area of higher productivity and greater yield." By doing this, Say argued that entrepreneurs
"added value to scarce resources".
Diff: 3
Learning Objective: 1.1 Summarize what entrepreneurship is and what entrepreneurs do.
AACSB: Analytical Thinking

2
5) The economy of the United States is a ________ system.
A) free-enterprise
B) controlled
C) closed
D) centralized
Answer: A
Diff: 1
Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fit
into them.
AACSB: Analytical Thinking
6) A(n) ________ is the wealth and resources of a country or region, including its financial
structure.
A) economy
B) government
C) justice system
D) free enterprise
Answer: A
Diff: 2
Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fit
into them.
AACSB: Reflective Thinking
7) Entrepreneurs have more control over more aspects of their working lives than employees. Of
which aspect of their working lives do employees have more control?
A) Financial uncertainty
B) Working conditions
C) Time
D) Encroachment on personal time
Answer: A
Diff: 2
Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fit
into them.
AACSB: Reflective Thinking
8) Cash or goods invested to generate income and wealth is called ________.
A) profit
B) capital
C) debt
D) liability
Answer: B
Diff: 1
Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fit
into them.
AACSB: Reflective Thinking

3
9) The U.S. economy is a free enterprise system. It is also referred to as a "free trade system"
because it is based on ________.
A) voluntary exchange
B) gambling and chance
C) involuntary exchange
D) government cooperation
Answer: A
Diff: 1
Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fit
into them.
AACSB: Analytical Thinking
10) Entrepreneurship can be very challenging. Which is not a typical challenge of being an
entrepreneur?
A) Loneliness
B) Financial reward
C) Long hours
D) Financial insecurity
Answer: B
Diff: 2
Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fit
into them.
AACSB: Reflective Thinking
11) Which of the following is not a characteristic of the free-market system?
A) Individuals and companies may compete for their own economic gains.
B) Private wealth and property ownership are permissible.
C) Prices are determined by a central authority.
D) Free-market forces primarily determine prices.
Answer: C
Diff: 3
Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fit
into them.
AACSB: Analytical Thinking
12) The free-market system is also called ________.
A) volunteerism
B) socialism
C) capitalism
D) dogmatism
Answer: C
Diff: 1
Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fit
into them.
AACSB: Reflective Thinking

4
13) Benefits of becoming an entrepreneur include independence, satisfaction, financial reward,
self-esteem, and contributions to society.
Answer: TRUE
Diff: 2
Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fit
into them.
AACSB: Analytical Thinking
14) The economy of the United States is a free-enterprise system.
Answer: TRUE
Diff: 1
Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fit
into them.
AACSB: Analytical Thinking
15) Most of the world's businesses are ________ businesses.
A) small
B) medium-sized
C) large
D) family-owned
Answer: A
Diff: 1
Learning Objective: 1.3 Describe small business.
AACSB: Analytical Thinking
16) A company that has more than ________ employees and sales of more than $________
million per year is considered to be a "big" business.
A) 100; 5
B) 100; 10
C) 500; 5
D) 500; 10
Answer: C
Diff: 2
Learning Objective: 1.3 Describe small business.
AACSB: Analytical Thinking
17) Some of the world's greatest entrepreneurs have overcome challenges from their childhood
and youth, including all of these except ________.
A) learning disabilities
B) abuse
C) extreme poverty
D) financial prosperity
Answer: D
Diff: 3
Learning Objective: 1.3 Describe small business.
AACSB: Reflective Thinking

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5
18) The corporate equivalent of paying owners a portion of the business's profits is called a
________.
A) bonus
B) dividend
C) capital
D) revenue
Answer: B
Diff: 3
Learning Objective: 1.4 Understand the costs and benefits of entrepreneurship.
AACSB: Reflective Thinking
19) Which of the following is not a characteristic that is helpful for an entrepreneur to have?
A) Self-confidence
B) Caution
C) Self-esteem
D) Drive
Answer: B
Diff: 1
Learning Objective: 1.4 Understand the costs and benefits of entrepreneurship.
AACSB: Analytical Thinking
20) How does the free-enterprise system discourage entrepreneurs who waste resources?
A) The government penalizes them.
B) They run into regulations that make it too difficult for them to operate.
C) They can't make a profit and are forced out of business.
D) They limit competition.
Answer: C
Diff: 3
Learning Objective: 1.4 Understand the costs and benefits of entrepreneurship.
AACSB: Analytical Thinking
21) Why do consumers benefit from free trade and the resulting competition between
businesses?
A) Competition drives away the entrepreneurs who use resources most wisely.
B) Competition tends to drive down prices and improve quality.
C) Competition offers consumers fewer choices and makes the marketplace less confusing.
D) Competition reduces the choices to consumers.
Answer: B
Diff: 3
Learning Objective: 1.4 Understand the costs and benefits of entrepreneurship.
AACSB: Reflective Thinking

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6
22) A for-profit enterprise with the dual goals of achieving profitability and attaining beneficial
returns for society is called ________.
A) venture capitalism
B) serial entrepreneurship
C) social entrepreneurship
D) portfolio entrepreneurship
Answer: C
Diff: 3
Learning Objective: 1.4 Understand the costs and benefits of entrepreneurship.
AACSB: Reflective Thinking
23) Describe three potential rewards of becoming an entrepreneur that appeal to you.
Answer: (The answer should describe 3 of the following 5 rewards.)
1. Control Over Time - Do you work better at midnight than at 8 a.m.? If you start your own
business, you have control over how you spend your time. Are you the type of person who would
rather work really hard for two weeks nonstop and then take a break? If you are an entrepreneur,
you can. You can also choose to hire other people to do tasks that you do not want to do or are
not good at, so you can stay focused on what you do best. Bill Gates likes to spend his time
designing software. He hires other people to manage Microsoft's operations and market and sell
its products.
2. Fulfillment - Successful entrepreneurs are passionate about their businesses. They are excited
and fulfilled by their work. Entrepreneurs are almost never bored. If something about running
their business is boring to them, they can hire someone to do that task.
3. Creation/Ownership - Entrepreneurship is a creative endeavor: Entrepreneurs put their time
into creating something that they hope will survive and become profitable. Entrepreneurs own
the businesses that they create and the profits that the businesses earn. Ownership is the key to
wealth. Your goal is to create a business that makes a continuing profit. Eventually, you may be
able to sell that business for a multiple of earnings. That is how entrepreneurs create wealth.
4. Control Over Compensation - Entrepreneurs choose how they are paid. As owner of your
company you can decide to:
• Pay yourself a salary - a fixed payment made at regular intervals, such as every week, or
every month. No matter how much time you put in, the salary remains the same.
• Pay yourself a wage - a fixed payment per hour.
• Take a share of the company's profit - as the owner you can pay yourself a portion of the
business's profit. This payment is called a dividend.
• Take a commission on every sale you make. - A commission is a percentage of the value of a
sale. If you decide to pay yourself 10% commission and you sell one of your products for $120,
your commission on the sale would be $12.
5. Control Over Working Conditions - As an entrepreneur you can create a working environment
that reflects your values. If you believe in recycling, you can make sure your company recycles.
You also evaluate your own performance. No one else has the power to hire or fire you.
Diff: 3
Learning Objective: 1.4 Understand the costs and benefits of entrepreneurship.
AACSB: Analytical Thinking

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7
24) Explain why it is important to consider opportunity cost when making a decision.
Answer: Using a comparison of costs and benefits to make a decision is called cost/benefit
analysis. It is a helpful tool because we tend to make decisions with our emotions, not by using
our intellect to evaluate the pros and cons. Cost/benefit analysis can be inaccurate without
including opportunity cost. This is the cost of your "next-best investment." People often make
decisions without considering opportunity costs and then wonder why they are not happy with
the outcome. Each time you make a decision about what to do with your time, energy, or money,
think about the cost of the opportunities that you are giving up.
Diff: 3
Learning Objective: 1.4 Understand the costs and benefits of entrepreneurship.
AACSB: Reflective Thinking
25) As a start-up, Uber has a current market valuation of over $50 billion. Uber is an example of
a(n) ________.
A) unicorn
B) lifestyle business
C) intrapreneurship venture
D) microenterprise
Answer: A
Diff: 2
Learning Objective: 1.5 Recognize the various entrepreneurial options.
AACSB: Reflective Thinking
26) Entrepreneurs that participate in activities to avoid harm to the environment or help protect it
in some ways are engaged in ________.
A) venture philanthropy
B) green entrepreneurship
C) social entrepreneurship
D) corporate responsibility
Answer: B
Diff: 1
Learning Objective: 1.5 Recognize the various entrepreneurial options.
AACSB: Reflective Thinking
27) Entrepreneurs look at five basic ways of opportunity for business ideas. Which is not one of
those five?
A) Developing a new market for an existing product
B) Producing a product more cheaply
C) Finding new ways to use existing technology
D) Raising prices in an existing market
Answer: D
Diff: 3
Learning Objective: 1.6 Identify and evaluate opportunities to start your own business.
AACSB: Analytical Thinking

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8
28) Entrepreneurs view problems as a(n) ________.
A) roadblock
B) opportunity
C) hurdle
D) challenge
Answer: B
Diff: 3
Learning Objective: 1.6 Identify and evaluate opportunities to start your own business.
AACSB: Reflective Thinking
29) The great economist Joel Schumpeter emphasized that innovation is the key to
entrepreneurship. Which of the following is a basic way to create a new business?
A) Expand on old technology
B) Develop current markets
C) Use new technology to produce a new product
D) Find a less expensive source of resources
Answer: C
Diff: 3
Learning Objective: 1.6 Identify and evaluate opportunities to start your own business.
AACSB: Analytical Thinking
30) The best business opportunities often combine both ________ and ________.
A) extreme luck; chance
B) luck; sales skill
C) sales; marketing
D) internal; external factors
Answer: D
Diff: 2
Learning Objective: 1.6 Identify and evaluate opportunities to start your own business.
AACSB: Reflective Thinking
31) A business opportunity is an idea, plus ________.
A) it is attractive to suppliers
B) it may have marginal performance in your business environment
C) it has a limitless window of time to work within
D) it is attractive to customers and will work in your business environment
Answer: D
Diff: 3
Learning Objective: 1.7 Distinguish between ideas and opportunities.
AACSB: Analytical Thinking

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9
32) Russell Simmons, founder of Def Jam Records, believes that if you know 10 people who will
buy your product, ________ would be willing to buy it if they knew about it.
A) 1,000
B) 10 more
C) 10 million
D) 10,000
Answer: C
Diff: 2
Learning Objective: 1.7 Distinguish between ideas and opportunities.
AACSB: Application of Knowledge
33) A(n) ________ is an idea that is based on what customers need or want and are willing to
buy sufficiently often at a high enough price to sustain a business.
A) opportunity
B) idea
C) strategy
D) All of the above.
Answer: A
Diff: 3
Learning Objective: 1.7 Distinguish between ideas and opportunities.
AACSB: Analytical Thinking
34) What are the four characteristics of a business opportunity?
Answer:
1. It is attractive to customers because it creates or adds value for its customers.
2. It will work in the business environment.
3. It can be executed in a defined window of opportunity.
4. It can be implemented with the right team to make it durable.
Diff: 3
Learning Objective: 1.7 Distinguish between ideas and opportunities.
AACSB: Analytical Thinking
35) A(n) ________ is a legal and commercial relationship between the owner of a trademark, a
service mark, trade name, or advertising symbol and an individual or group seeking to use that
identification in a business.
A) franchise
B) idea
C) venture
D) opportunity
Answer: A
Diff: 3
Learning Objective: 1.8 Explore the multiple paths to entrepreneurship.
AACSB: Analytical Thinking

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10
36) In selling an existing business, due diligence is the exercise of reasonable care in the
evaluation of the business opportunity.
Answer: FALSE
Diff: 3
Learning Objective: 1.8 Explore the multiple paths to entrepreneurship.
AACSB: Analytical Thinking
37) The two primary forms of franchising are product/trade name franchising and business
format franchising.
Answer: TRUE
Diff: 3
Learning Objective: 1.8 Explore the multiple paths to entrepreneurship.
AACSB: Analytical Thinking
38) When you license a technology, you enter into a contract to use it by purchasing the right to
own it.
Answer: FALSE
Diff: 3
Learning Objective: 1.8 Explore the multiple paths to entrepreneurship.
AACSB: Analytical Thinking
39) If a business is not making a profit, the entrepreneur knows that ________.
A) no one wants to buy the product/service
B) (s)he is not making good use of scarce resources
C) people are willing to buy the product/service at a high price
D) competition is too great
Answer: B
Diff: 3
Learning Objective: 1.9 Explain success signals for entrepreneurs.
AACSB: Analytical Thinking
40) Profit results from the entrepreneur's choices. In this concept, there is a term called "trade-
off." With the help of an example, explain what is meant by a "trade-off."
Answer: In business, trade-off is the act of giving up one thing for another. This is the choice
that entrepreneurs make all the time and trade-offs affect the profitability of the enterprise. A
common example of a trade-off that many entrepreneurs in the food business face is in the choice
of ingredients. Let's suppose that oil is a key ingredient in the product that an entrepreneur
makes. Let's say that olive oil costs one and a half times more than canola oil. If the entrepreneur
believes that there are only minor taste differences between the two oils, a trade-off is whether to
reduce cost by switching to canola oil, although doing that may have a small effect on the taste
of the product. What the entrepreneur is giving up in taste, (s)he is gaining in profits.
Diff: 2
Learning Objective: 1.9 Explain success signals for entrepreneurs.
AACSB: Analytical Thinking

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1
Entrepreneurship: Starting and Operating a Small Business, 5e (Glackin/NFTE)
Chapter 2 Pathways to Success: Processes and Instruments
1) Which of the following helps an entrepreneur with the go/no go decision?
A) Business plan
B) Marketing plan
C) Cash flow analysis
D) Feasibility analysis
Answer: D
Diff: 1
Learning Objective: 2.1 Describe a feasibility analysis and choose when to create one.
AACSB: Analytical Thinking
2) Lean start-up is a hypothesis driven approach to business startup using iterative development.
Answer: TRUE
Diff: 2
Learning Objective: 2.2 Articulate the lean start-up methodology.
AACSB: Analytical Thinking
3) The Business Model Canvas has ________ core building blocks that are intended to supply
answers to critical questions.
A) 3
B) 9
C) 6
D) 8
Answer: B
Diff: 2
Learning Objective: 2.3 Prepare a Business Model Canvas.
AACSB: Application of Knowledge
4) Bankers and other potential investors will often refuse to see an entrepreneur who does not
have a ________.
A) complete business plan
B) sales forecast
C) resumé
D) marketing plan
Answer: A
Diff: 1
Learning Objective: 2.4 Identify primary business plan contents.
AACSB: Analytical Thinking

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2
5) Writing a business plan can ensure that you ________.
A) achieve your expense projections
B) figure out how to make your business work
C) meet your target revenue goals
D) make a profit
Answer: B
Diff: 2
Learning Objective: 2.4 Identify primary business plan contents.
AACSB: Reflective Thinking
6) A(n) ________ can be a front line of defense against a poor idea.
A) goal
B) mission
C) objective
D) business plan
Answer: D
Diff: 3
Learning Objective: 2.5 Summarize the various purposes for a business plan and the audiences
for one.
AACSB: Reflective Thinking
7) It is best to wait to write a business plan until you find lenders or investors.
Answer: FALSE
Diff: 2
Learning Objective: 2.5 Summarize the various purposes for a business plan and the audiences
for one.
AACSB: Reflective Thinking
8) A business plan is the key to raising capital.
Answer: TRUE
Diff: 1
Learning Objective: 2.5 Summarize the various purposes for a business plan and the audiences
for one.
AACSB: Reflective Thinking
9) Explain 3 reasons why a start-up organization would have a written business plan.
Answer:
1. Writing a business plan early will save you time and money.
2. Your business plan is the key to raising capital.
3. The business plan is an operations guide.
Diff: 2
Learning Objective: 2.5 Summarize the various purposes for a business plan and the audiences
for one.
AACSB: Analytical Thinking

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3
10) Your business plan projections should be ________.
A) incredible and impossible to reach
B) optimistic and a bit of a stretch
C) practical and easy to reach
D) realistic and attainable
Answer: D
Diff: 3
Learning Objective: 2.6 Differentiate the components of a business plan.
AACSB: Reflective Thinking
11) The ________ section of the business plan should be written last.
A) cover page
B) mission, vision, culture
C) executive summary
D) financial statements
Answer: C
Diff: 1
Learning Objective: 2.6 Differentiate the components of a business plan.
AACSB: Reflective Thinking
12) The executive summary contains the ________.
A) inspired enthusiasm for success
B) story of the business
C) funding request
D) All of the above.
Answer: D
Diff: 3
Learning Objective: 2.6 Differentiate the components of a business plan.
AACSB: Analytical Thinking
13) Making the beliefs, values, and behavioral norms explicit and intentional builds the
________ of an organization.
A) culture
B) vision
C) mission
D) All of the above.
Answer: A
Diff: 3
Learning Objective: 2.6 Differentiate the components of a business plan.
AACSB: Analytical Thinking

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4
14) One section of the business plan that is often neglected is the ________.
A) marketing plan
B) opportunity analysis and research
C) executive summary
D) financial projections
Answer: B
Diff: 3
Learning Objective: 2.6 Differentiate the components of a business plan.
AACSB: Analytical Thinking
15) The ________ addresses the roles of the community, region, nation, and world in a business.
A) business analysis
B) environmental analysis
C) industry analysis
D) proof of market
Answer: B
Diff: 2
Learning Objective: 2.6 Differentiate the components of a business plan.
AACSB: Analytical Thinking
16) Target market segments are defined by common factors such as ________.
A) psychographics
B) geography
C) demographics
D) All of the above.
Answer: D
Diff: 2
Learning Objective: 2.6 Differentiate the components of a business plan.
AACSB: Analytical Thinking
17) A competitive analysis is an important component of ________.
A) a mission statement
B) an opportunity analysis
C) a vision statement
D) All of the above.
Answer: B
Diff: 2
Learning Objective: 2.6 Differentiate the components of a business plan.
AACSB: Reflective Thinking

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