Test Bank for Entrepreneurship: Starting and Operating A Small Business, 5th Edition

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Entrepreneurship:Starting and Operating ASmall BusinessFifthEditionSteve MariottiCarolineGlackinEntrepreneurship: Startingand Operating A SmallBusiness, Test Bank, 5eRevised byRamachandranSubramanian

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1Entrepreneurship: Starting and Operating a Small Business, 5e(Glackin/NFTE)Chapter 1Entrepreneurs and Entrepreneurship1) Products are tangible, meaning ________.A) you can't actually touch themB) you can sell themC) you can touch themD) you can see themAnswer: CDiff: 1Learning Objective: 1.1 Summarize what entrepreneurship is and what entrepreneurs do.AACSB: Reflective Thinking2) Entrepreneurs are often both owners and ________.A) creditorsB) employeesC) customersD) suppliersAnswer: BDiff: 2Learning Objective: 1.1 Summarize what entrepreneurship is and what entrepreneurs do.AACSB: Reflective Thinking3) A necessity-based entrepreneur starts a business to exploit a perceived opportunity or topursue one that they created.Answer: FALSEDiff: 1Learning Objective: 1.1 Summarize what entrepreneurship is and what entrepreneurs do.AACSB: Reflective Thinking4) Explain how entrepreneurs can add value to scarce resources, and what signal they use todetermine 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 tofill a need. The French economist Jean Baptiste Say wrote at the turn of the 19th century: "Theentrepreneur shifts economic resources [like wood or coal] out of an area of lower and into anarea of higher productivity and greater yield." By doing this, Say argued that entrepreneurs"added value to scarce resources".Diff: 3Learning Objective: 1.1 Summarize what entrepreneurship isand what entrepreneurs do.AACSB: Analytical Thinking

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25) The economy of the United States is a ________ system.A) free-enterpriseB) controlledC) closedD) centralizedAnswer: ADiff: 1Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fitinto them.AACSB: Analytical Thinking6) A(n) ________ is the wealth and resources of a country or region, including its financialstructure.A) economyB) governmentC) justice systemD) free enterpriseAnswer: ADiff: 2Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fitinto them.AACSB: Reflective Thinking7) Entrepreneurs have more control over more aspects of their working lives than employees. Ofwhich aspect of their working lives do employees have more control?A) Financial uncertaintyB) Working conditionsC) TimeD) Encroachment on personal timeAnswer: ADiff: 2Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fitinto them.AACSB: Reflective Thinking8) Cash or goods invested to generate income and wealth is called ________.A) profitB) capitalC) debtD) liabilityAnswer: BDiff: 1Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fitinto them.AACSB: Reflective Thinking

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39) 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 exchangeB) gambling and chanceC) involuntary exchangeD) government cooperationAnswer: ADiff: 1Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fitinto them.AACSB: Analytical Thinking10) Entrepreneurship can be very challenging. Which isnota typical challenge of being anentrepreneur?A) LonelinessB) Financial rewardC) Long hoursD) Financial insecurityAnswer: BDiff: 2Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fitinto them.AACSB: Reflective Thinking11) Which of thefollowing isnota 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: CDiff: 3Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fitinto them.AACSB: Analytical Thinking12) The free-market system is also called ________.A) volunteerismB) socialismC) capitalismD) dogmatismAnswer: CDiff: 1Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fitinto them.AACSB: Reflective Thinking

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413) Benefits of becoming an entrepreneur include independence,satisfaction, financial reward,self-esteem, and contributions to society.Answer: TRUEDiff: 2Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fitinto them.AACSB: Analytical Thinking14) The economy of the United States is a free-enterprise system.Answer: TRUEDiff: 1Learning Objective: 1.2 Examine how free-enterprise economies work and how entrepreneurs fitinto them.AACSB: Analytical Thinking15) Most of the world's businesses are ________ businesses.A) smallB) medium-sizedC) largeD) family-ownedAnswer: ADiff: 1Learning Objective: 1.3 Describe small business.AACSB: Analytical Thinking16) A company that has more than ________ employees and sales of more than $________million per year is considered to be a "big" business.A) 100; 5B) 100; 10C) 500; 5D) 500; 10Answer: CDiff: 2Learning Objective: 1.3 Describe small business.AACSB: Analytical Thinking17) Some of the world's greatest entrepreneurs have overcome challenges from theirchildhoodand youth, including all of theseexcept________.A) learning disabilitiesB) abuseC) extreme povertyD) financial prosperityAnswer: DDiff: 3Learning Objective: 1.3 Describe small business.AACSB: Reflective Thinking

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518) The corporate equivalent of paying owners a portion of the business's profits is called a________.A) bonusB) dividendC) capitalD) revenueAnswer: BDiff: 3Learning Objective: 1.4 Understand the costs and benefits of entrepreneurship.AACSB: Reflective Thinking19) Which of the following isnota characteristic that is helpful for an entrepreneur to have?A) Self-confidenceB) CautionC) Self-esteemD) DriveAnswer: BDiff: 1Learning Objective: 1.4 Understand the costs and benefits of entrepreneurship.AACSB:Analytical Thinking20) 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: CDiff: 3Learning Objective: 1.4 Understand the costs and benefits of entrepreneurship.AACSB: Analytical Thinking21) Why do consumers benefit from free trade and the resulting competition betweenbusinesses?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: BDiff: 3Learning Objective: 1.4 Understand the costs and benefits of entrepreneurship.AACSB: Reflective Thinking

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622) A for-profit enterprise with the dual goals of achieving profitability and attaining beneficialreturns for society is called ________.A) venture capitalismB) serial entrepreneurshipC) social entrepreneurshipD) portfolio entrepreneurshipAnswer: CDiff: 3Learning Objective: 1.4 Understand the costs and benefits of entrepreneurship.AACSB: Reflective Thinking23) 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 youstart your ownbusiness, you have control over how you spend your time. Are you the type of person who wouldrather 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 peopleto do tasks that you do not want to do or arenot good at, so you can stay focused on what you do best. Bill Gates likes to spend his timedesigning software. He hires other people to manage Microsoft's operations and market and sellits products.2. Fulfillment-Successful entrepreneurs are passionate about their businesses. They are excitedand fulfilled by their work. Entrepreneurs are almost never bored. If something about runningtheir business is boring to them, they can hire someone to do that task.3. Creation/Ownership-Entrepreneurship is a creative endeavor: Entrepreneurs put their timeinto creating something that they hope will survive and become profitable. Entrepreneurs ownthe businesses that they create and the profits that the businessesearn. Ownership is the key towealth. Your goal is to create a business that makes a continuing profit. Eventually, you may beable 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 yourcompany you can decide to:•Pay yourself a salary-a fixed payment made at regular intervals, such as every week, orevery 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 thebusiness's profit. This payment is called a dividend.•Take a commission on every sale you make.-A commission isa percentage of the value of asale. 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 environmentthat 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: 3Learning Objective: 1.4 Understand the costs and benefitsof entrepreneurship.AACSB: Analytical Thinking

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724) 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/benefitanalysis. It is a helpful tool because we tend to make decisions with our emotions, not by usingour intellect to evaluate the pros and cons. Cost/benefit analysis can be inaccurate withoutincluding opportunity cost. This is the cost of your "next-best investment." People often makedecisions without considering opportunity costs and then wonder why they are not happy withthe 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: 3Learning Objective: 1.4 Understand the costs and benefits of entrepreneurship.AACSB: Reflective Thinking25) As a start-up, Uber has a current market valuation of over $50 billion. Uber is an example ofa(n) ________.A) unicornB) lifestyle businessC) intrapreneurship ventureD) microenterpriseAnswer: ADiff: 2Learning Objective: 1.5 Recognize the various entrepreneurial options.AACSB: Reflective Thinking26) Entrepreneurs that participate in activities to avoid harm to the environment orhelp protect itin some ways are engaged in ________.A) venture philanthropyB) green entrepreneurshipC) social entrepreneurshipD) corporate responsibilityAnswer: BDiff: 1Learning Objective: 1.5 Recognize the various entrepreneurial options.AACSB:Reflective Thinking27) Entrepreneurs look at five basic ways of opportunity for business ideas. Which isnotone ofthose five?A) Developing a new market for an existing productB) Producing a product more cheaplyC) Finding new ways to use existing technologyD) Raising prices in an existing marketAnswer: DDiff: 3Learning Objective: 1.6 Identify and evaluate opportunities to start your own business.AACSB: Analytical Thinking

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828) Entrepreneurs view problems as a(n) ________.A) roadblockB) opportunityC) hurdleD) challengeAnswer: BDiff: 3Learning Objective: 1.6 Identify and evaluate opportunities to start your own business.AACSB: Reflective Thinking29) The great economist Joel Schumpeter emphasized that innovation is the key toentrepreneurship. Which of the following is a basic way to create a new business?A) Expand on old technologyB) Develop current marketsC) Use new technology to produce a new productD) Find a less expensive source of resourcesAnswer: CDiff: 3Learning Objective: 1.6 Identify and evaluate opportunities to start your own business.AACSB: Analytical Thinking30) The best business opportunities often combine both ________ and ________.A) extreme luck; chanceB) luck; sales skillC) sales; marketingD) internal; external factorsAnswer: DDiff: 2Learning Objective: 1.6 Identify and evaluate opportunities to start your own business.AACSB: Reflective Thinking31) A business opportunity is an idea, plus ________.A) it is attractive to suppliersB) it mayhave marginal performance in your business environmentC) it has a limitless window of time to work withinD) it is attractive to customers and will work in your business environmentAnswer: DDiff: 3Learning Objective: 1.7 Distinguish between ideas andopportunities.AACSB: Analytical Thinking

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932) Russell Simmons, founder of Def Jam Records, believes that if you know 10 people who willbuy your product, ________ would be willing to buy it if they knew about it.A) 1,000B) 10 moreC) 10 millionD) 10,000Answer: CDiff: 2Learning Objective: 1.7 Distinguish between ideas and opportunities.AACSB: Application of Knowledge33) A(n) ________ is an idea that is based on what customers need or want and are willing tobuy sufficiently often at a high enough price to sustain a business.A) opportunityB) ideaC) strategyD) All of the above.Answer: ADiff: 3Learning Objective: 1.7 Distinguish between ideas and opportunities.AACSB: Analytical Thinking34) 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: 3Learning Objective: 1.7 Distinguish between ideas and opportunities.AACSB: Analytical Thinking35) A(n) ________ is a legal and commercial relationship between the owner of a trademark, aservice mark, trade name, or advertising symbol and an individual or group seeking to use thatidentification in a business.A) franchiseB) ideaC) ventureD) opportunityAnswer: ADiff: 3Learning Objective: 1.8 Explore the multiple paths to entrepreneurship.AACSB: Analytical Thinking

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1036) In selling an existing business, due diligence is the exercise of reasonable care in theevaluation of the business opportunity.Answer: FALSEDiff: 3Learning Objective: 1.8 Explore the multiple paths to entrepreneurship.AACSB: Analytical Thinking37) The two primary forms of franchising are product/trade name franchising and businessformat franchising.Answer: TRUEDiff: 3Learning Objective: 1.8 Explore the multiple paths to entrepreneurship.AACSB: Analytical Thinking38) When you license a technology, you enter into a contract to use it by purchasing the right toown it.Answer: FALSEDiff: 3Learning Objective: 1.8 Explore the multiple paths to entrepreneurship.AACSB: Analytical Thinking39) If a business is not making a profit, the entrepreneur knows that ________.A) no one wants to buy the product/serviceB) (s)he is not making good use of scarce resourcesC) people are willing to buy the product/service at a high priceD) competition is too greatAnswer: BDiff: 3LearningObjective: 1.9 Explain success signals for entrepreneurs.AACSB: Analytical Thinking40) 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 choicethat entrepreneurs make all the time and trade-offs affect the profitability of the enterprise. Acommon example of a trade-off that many entrepreneursin the food business face is in the choiceof ingredients. Let's suppose that oil is a key ingredient in the product that an entrepreneurmakes. Let's say that olive oil costs one and a half times more than canola oil. If the entrepreneurbelieves that there are only minor taste differences between the two oils, a trade-off is whether toreduce cost by switching to canola oil, although doing that may have a small effect on the tasteof the product. What the entrepreneur is giving up in taste, (s)he is gaining in profits.Diff: 2Learning Objective: 1.9 Explain success signals for entrepreneurs.AACSB: Analytical Thinking

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1Entrepreneurship: Starting and Operating a Small Business, 5e(Glackin/NFTE)Chapter 2Pathways to Success: Processes and Instruments1) Which of the following helps an entrepreneur with the go/no go decision?A) Business planB) Marketing planC) Cashflow analysisD) Feasibility analysisAnswer: DDiff: 1Learning Objective: 2.1 Describe a feasibility analysis and choose when to create one.AACSB: Analytical Thinking2) Lean start-up is a hypothesis driven approach to business startup using iterative development.Answer: TRUEDiff: 2Learning Objective: 2.2 Articulate the lean start-up methodology.AACSB: Analytical Thinking3) The Business Model Canvas has ________ core building blocks that are intended to supplyanswers to critical questions.A) 3B) 9C) 6D) 8Answer: BDiff: 2Learning Objective: 2.3 Prepare a Business Model Canvas.AACSB: Application of Knowledge4) Bankers and other potential investors will often refuse to see an entrepreneur who does nothave a ________.A) complete business planB) sales forecastC) resuméD) marketing planAnswer: ADiff: 1Learning Objective: 2.4 Identify primary business plan contents.AACSB: Analytical Thinking

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25) Writing a business plan can ensure that you ________.A) achieve your expense projectionsB) figure out how to make your business workC) meet your target revenue goalsD) make a profitAnswer: BDiff: 2Learning Objective: 2.4 Identify primary business plan contents.AACSB: Reflective Thinking6) A(n) ________ can be a front line of defense against a poor idea.A) goalB) missionC) objectiveD) business planAnswer: DDiff: 3Learning Objective: 2.5 Summarize the various purposes for a business plan and the audiencesfor one.AACSB: Reflective Thinking7) It is best to waitto write a business plan until you find lenders or investors.Answer: FALSEDiff: 2Learning Objective: 2.5 Summarize the various purposes for a business plan and the audiencesfor one.AACSB: Reflective Thinking8) A business plan is the key to raising capital.Answer: TRUEDiff: 1Learning Objective: 2.5 Summarize the various purposes for a business plan and the audiencesfor one.AACSB: Reflective Thinking9) 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: 2Learning Objective: 2.5 Summarize the various purposes for a business plan and theaudiencesfor one.AACSB: Analytical Thinking

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310) Your business plan projections should be ________.A) incredible and impossible to reachB) optimistic and a bit of a stretchC) practical and easy to reachD) realistic and attainableAnswer: DDiff:3Learning Objective: 2.6 Differentiate the components of a business plan.AACSB: Reflective Thinking11) The ________ section of the business plan should be written last.A) cover pageB) mission, vision, cultureC) executive summaryD) financial statementsAnswer: CDiff: 1Learning Objective: 2.6 Differentiate the components of a business plan.AACSB: Reflective Thinking12) The executive summary contains the ________.A) inspired enthusiasm for successB) story of the businessC) funding requestD) All of the above.Answer: DDiff: 3Learning Objective: 2.6 Differentiate the components of a business plan.AACSB: Analytical Thinking13) Making the beliefs, values, and behavioral norms explicit and intentional builds the________ of an organization.A) cultureB) visionC) missionD) All of the above.Answer: ADiff: 3Learning Objective: 2.6 Differentiate the components of a business plan.AACSB: Analytical Thinking

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414) One section of the business plan that is often neglected is the ________.A) marketing planB) opportunity analysis and researchC) executive summaryD) financial projectionsAnswer: BDiff: 3Learning Objective: 2.6 Differentiate the components of a business plan.AACSB: Analytical Thinking15) The ________ addresses theroles of the community, region, nation, and world in a business.A) business analysisB) environmental analysisC) industry analysisD) proof of marketAnswer: BDiff: 2Learning Objective: 2.6 Differentiate the components of a business plan.AACSB: Analytical Thinking16) Target market segments are defined by common factors such as ________.A) psychographicsB) geographyC) demographicsD) All of the above.Answer: DDiff: 2Learning Objective: 2.6 Differentiate the components of a business plan.AACSB: Analytical Thinking17) A competitive analysis is an important component of ________.A) a mission statementB) an opportunity analysisC) a vision statementD) All of the above.Answer: BDiff: 2Learning Objective: 2.6 Differentiate the components of a business plan.AACSB: Reflective Thinking

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