Name: Understanding Business 12e By William Nickels - Test Bank
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Sample Questions Posted Below

Understanding Business, 12e (Nickels)

Chapter 06 Entrepreneurship and Starting a Small Business

1) Entrepreneurship involves accepting the risk of starting and running a business.

Answer: TRUE

Difficulty: 1 Easy

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

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2) Entrepreneurship is another name for management.

Answer: FALSE

Difficulty: 1 Easy

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

3) Entrepreneurs are less important now than in the past to the U.S. economy.

Answer: FALSE

Difficulty: 1 Easy

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.4) While entrepreneurs frequently earn significant profits for themselves, their impact on society

is quite small.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

5) Many businesses started by entrepreneurs have grown into major corporations employing

thousands of workers.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

6) Entrepreneurs are motivated by the desire to earn a profit.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.7) Entrepreneurs take calculated risks.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

8) Most entrepreneurs prefer working for someone else.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

9) Most entrepreneurs are more interested in personal achievement than in power.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.10) If you have managerial skills and leadership ability, you also possess the personality to be an

entrepreneur.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

11) Because of the stress of being in business for yourself, it’s important that entrepreneurs have

people around them to help replenish their enthusiasm.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

12) Successful entrepreneurs rely on others for direction and support.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.13) Successful entrepreneurs accept the risk of failure.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

14) Entrepreneurs avoid risk and place a high priority on security.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

15) It is important for an entrepreneur to be highly energetic.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.16) Most entrepreneurs get the ideas for their products and services from a flash of inspiration.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

17) Potential entrepreneurs would be well advised to surround themselves with people who are

smarter than they are.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

18) An entrepreneurial team is a group of experienced managers who share the same skills and

abilities.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.19) Entrepreneurial teams combine the creative marketing and production ideas of a group of

experienced people.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

20) Micropreneurs is a term used to describe entrepreneurs who focus on the continued growth

of their businesses.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

21) The most important difference between entrepreneurs and micropreneurs is the focus placed

by micropreneurs on balancing the demands of work and family.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.22) The primary concern of micropreneurs is to balance the risk of starting your own business

with the desire to build a powerful organization earning significant profits.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

23) Many micropreneurs are home-based business owners.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

24) Micropreneurs are motivated by a desire to have both a satisfying family life and rewarding

work.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.25) Advancements in computer technology put home-based businesses at a disadvantage.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

26) Many micropreneurs operate home-based businesses in the service industry.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

27) Corporate downsizing reduces the opportunities for home-based businesses.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.28) Successful micropreneurs require self-discipline to separate work from family

responsibilities.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

29) Micropreneurs are exempt from the local ordinances that restrict home-based businesses

from operating in residential areas.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

30) One advantage enjoyed by home-based businesses is the relative ease in attracting new

customers.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.31) Small businesses have not significantly participated in online sales.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

32) Online businesses avoid the risk of failure faced by traditional start-up businesses.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

33) An intrapreneur is the creative person who starts and manages a nonprofit organization.

Answer: FALSE

Difficulty: 1 Easy

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.34) Creative people working as entrepreneurs within a large organization are called

intrapreneurs.

Answer: TRUE

Difficulty: 1 Easy

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

35) Entrepreneurial spirit is unique to a small business environment.

Answer: FALSE

Difficulty: 1 Easy

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

36) Large organizations encourage intrapreneurship as a strategy to improve their profitability

through new products.

Answer: TRUE

Difficulty: 1 Easy

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.37) By passing the Immigration Act of 1990, the U.S. government acted to encourage

entrepreneurs to immigrate to the United States.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

38) The U.S. government offers investor visas to attract more entrepreneurs.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

39) The position of our government is to restrict foreign entrepreneurs from operating within the

U.S.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.40) Business incubators provide assistance to established companies attempting to generate

foreign sales.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

41) A National Business Incubator Association study indicates that over 85 percent of incubator

graduates remain in business.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

42) Enterprise zones offer lower tax rates and government assistance to attract private business

investment.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.43) Independence, challenge, and opportunity are among the key reasons given by those who

assume the risks of entrepreneurship.

Answer: TRUE

Explanation: Many factors encourage people to accept the risks associated with

entrepreneurship, including the opportunities, independence, and challenges associated with

starting and operating a business. Clearly the potential of profits is also a great motivator for

entrepreneurs.

Difficulty: 2 Medium

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

44) Successful entrepreneurs are exclusively motivated by the desire to become rich.

Answer: FALSE

Explanation: Entrepreneurs are often motivated by the challenges and opportunities of starting

and operating a business, and by the chance to be independent. Thus, earning a profit is only one

of the goals that motivate entrepreneurs.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

45) Although corporate managers often exhibit the skills required of successful entrepreneurs,

they seldom have the desire to give up the perks and fringe benefits of corporate life and start

their own business.

Answer: FALSE

Explanation: Many corporate managers have left their jobs to become entrepreneurs.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.46) To be successful, entrepreneurs are dependent on the support of others for encouragement.

Answer: FALSE

Explanation: Entrepreneurs must be self-nurturing. They must believe in their ideas when others

do not.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

47) Entrepreneurial teams increase the cooperation between marketing, production, and other

functional areas of a business venture.

Answer: TRUE

Explanation: In entrepreneurial teams, all members work together to conceive, make, and

market a new product or service. A team may be better than an individual entrepreneur because

team members can combine creative skills with production and marketing skills right from the

start.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

48) State governments create new start-up business organizations called enterprise zones that are

later sold to private investors.

Answer: FALSE

Explanation: Also known as empowerment zones or enterprise communities, enterprise zones

are specific geographic areas where state governments try to attract private investment by

offering lower taxes for locating your business there.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.49) The United States government views entrepreneurship as a result of an individual’s self-

motivation. The government can do very little to encourage an individual to become an

entrepreneur.

Answer: FALSE

Explanation: The U.S. federal government passed the Immigration Act of 1990, which created a

category of investors’ visas intended to attract entrepreneurs to our country. Enterprise zones are

specific geographic areas to which governments attract private business investment by offering

lower taxes and other government support.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

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50) The Spotlight on Small Business box is testimonial to the fact that entrepreneurs are problem

solvers.

Answer: TRUE

Explanation: Ideas for businesses are often conceived by young people. They act upon those

ideas and develop successful businesses.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.51) According to the Spotlight on Small Business box, people in college are not ready to start

their own business.

Answer: FALSE

Explanation: Most students finish their education first, but the text cites examples of some

entrepreneurs who found success during college.

Difficulty: 2 Medium

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

52) Ariel wants to start and run her own business. Although she acknowledges it would be

helpful to earn a healthy profit, her main motivation is the exhilaration and challenge of starting

and running a business. Ariel’s attitude is different from most small business owners, who

usually focus solely on the earnings potential of their ventures, as well as the opportunity to

acquire power and prestige.

Answer: FALSE

Explanation: Many factors motivate entrepreneurs, including the challenges and opportunities of

starting and operating their own business. Additionally, most entrepreneurs seek a sense of

achievement rather than power.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.53) Victor is a dreamer rather than a doer. This will make him an ideal entrepreneur since their

job is to be creative and develop new ideas that are then implemented by others.

Answer: FALSE

Explanation: Entrepreneurs must be self-directed, self-nurturing, and action-oriented. They do

not depend on others to follow through on their ideas.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

54) Luca has eliminated the risk of entrepreneurship by preparing a detailed business plan.

Answer: FALSE

Explanation: Entrepreneurs must be able to take calculated risk because there are no guarantees

of success. Successful entrepreneurs must be willing to accept uncertainty. However, they should

take only calculated risks if they can help it.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.55) Timothy, Jude, and Eric are working in the marketing department of a multinational

corporation. They each have similar backgrounds and experience and are thinking about leaving

their current company to start their own business. Successful entrepreneurial teams are

comprised of these types of people because similarities in knowledge and skill ensure harmony

and consistency in their new business.

Answer: FALSE

Explanation: Entrepreneurial teams should include people with different skills and backgrounds.

The idea behind an entrepreneurial team is to bring together the creative, production, and

marketing skills necessary to ensure success.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

56) Antonio works for a textbook publisher. However, his dream is to establish a home-based

business providing his services to a variety of publishers. Antonio’s primary goal is to escape the

9 to 5 world of corporate publishing and to enjoy the opportunity of working for himself.

Antonio is an example of a micropreneur.

Answer: TRUE

Explanation: Micropreneur refers to a business owner who is interested in simply enjoying a

better lifestyle and who wants the opportunity to make a living doing the kind of work he or she

enjoys.

Difficulty: 3 Hard

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.57) Alex works for Wheelie’s, a large corporation that designs and manufactures accessories for

scooters, bicycles, and other children’s motorized toys. She is a creative force within the

company and has helped create and launch several new successful products. Alex is an example

of an intrapreneur.

Answer: TRUE

Explanation: Intrapreneurs are creative people who work within corporations to launch new

products and generate new profits.

Difficulty: 3 Hard

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

58) Grant received an e-mail stating that HE COULD EARN THOUSANDS!!!! just working a

few hours from home. Most likely Grant’s e-mail was a work-at-home scam.

Answer: TRUE

Explanation: Persons interested in working from home must be cautious of scam opportunities,

which will often take your money upfront, or never pay you for work provided.

Difficulty: 3 Hard

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.59) When Marley created the Mar’s Cookie Bars Company, she took advantage of a state-

supported incubator that offered her new business low-cost office space and basic services such

as accounting, legal advice, and secretarial help. Joining the incubator helped her company to

survive because it provided assistance in the critical stage of its early development.

Answer: TRUE

Explanation: According to a recent study conducted by the National Business Incubator

Association (NBIA), 87 percent of incubator graduates remain in business. Approximately 32

percent of all business incubators have ties to a university.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

60) The principles of management of a large business are similar to the principles of

management of a small business.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

61) To be classified as a small business, a firm must have no more than 100 employees.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.62) According to the Small Business Administration’s definition, small businesses are

independently owned and operated.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

63) A business is considered small by comparing its size to others in the same industry.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

64) Small businesses create 65% of the new jobs in the United States each year.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

65) Small businesses account for over 50% of the U.S.’s gross domestic product (GDP).

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.66) About 80% of U.S. workers find their first job in small business.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

67) Of all nonfarm businesses in the United States, almost 97% are considered small by the

Small Business Administration (SBA) standards.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

68) Compared to small businesses, large firms have a greater ability to provide personalized

customer service.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

69) Big businesses do not serve all the needs of a market.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.70) The most common small business failures occur in businesses that are the easiest to start.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Advantages and Disadvantages of Small Business Ownership

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

71) Only about 10% of all businesses qualify as small businesses using the definition of the

Small Business Administration.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Advantages and Disadvantages of Small Business Ownership

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

72) The small business sector that has the best chance of significant growth is legal services.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Advantages and Disadvantages of Small Business Ownership

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

73) Small businesses can often provide more personalized customer service than bigger rivals.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.74) Recent evidence suggests that the small business failure rate is significantly higher than

previously reported.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Advantages and Disadvantages of Small Business Ownership

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

75) Bad luck is the most often reported cause for small business failure.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Advantages and Disadvantages of Small Business Ownership

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

76) The business opportunities with the greatest growth potential tend to be in the high

technology industries.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Advantages and Disadvantages of Small Business Ownership

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

77) The easiest businesses to start are those that offer the greatest profit potential.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Advantages and Disadvantages of Small Business Ownership

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.78) Most business opportunities offer entrepreneurs high levels of security and profits.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Advantages and Disadvantages of Small Business Ownership

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

79) The easiest businesses to start also have the least growth potential and the greatest failure

rates.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Advantages and Disadvantages of Small Business Ownership

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

80) While the first job for many people is working for a small business, larger corporations

create most of the permanent new jobs.

Answer: FALSE

Explanation: Small businesses create 65% of the new jobs in the United States.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.81) If you are trying to prevent failure, it is a good idea to go into the business with good record-

keeping techniques.

Answer: TRUE

Explanation: Lack of good record-keeping is one of the causes of small business failure. Other

common causes are listed in Figure 6.3.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

82) If you go through the exercise of preparing a business plan, only to determine that you need

twice the amount of money to start the business than you have, the SBA and other expert

organizations encourage you to go ahead with your plans because if you understand the market,

you can use the revenues you accrue to make up the shortfall.

Answer: FALSE

Explanation: One of the causes of small business failure is lacking the necessary capital to start

the business. Creating a business plan is a good exercise for determining capital needs.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

83) Small businesses lack the resources to compete directly with big businesses.

Answer: FALSE

Explanation: Small businesses can often compete successfully against big businesses because

they are more able to quickly respond to business opportunities and able to offer more

personalized customer service.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.84) Because of their greater financial resources and expert staffs, big corporations can almost

always outperform small businesses.

Answer: FALSE

Explanation: Small businesses have some advantages over big firms. They are often more

flexible, and able to offer their customers more personalized service.

Difficulty: 2 Medium

Topic: The Advantages and Disadvantages of Small Business Ownership

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

85) Tessa has just graduated with a business degree. Her job hunt should only focus on large

corporations.

Answer: FALSE

Explanation: Since small businesses create 65% of the new jobs in the U.S., if Tessa focuses on

job opportunities with big firms, she is likely to limit her chances of finding employment.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

86) Kate, a manager at a small manufacturing firm, has offered to help manage a local branch of

the YMCA. Unfortunately, Kate will find that the skills acquired managing a small business will

not be useful in managing a nonprofit organization.

Answer: FALSE

Explanation: The skills needed to manage small businesses, big businesses, charities, churches,

and government agencies are very similar.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.87) Your brother is a dentist and has opened a new practice in your hometown. As a business

student you know that this type of business experiences low failure rates.

Answer: TRUE

Explanation: Many of the businesses with the lowest failure rates require advanced degrees to

start. This would include veterinary services and dentists’ offices. However, while training and

degrees may buy security, they do not tend to produce high growth rates.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

88) Valerie wants to start her own small business. If her primary goal is to grow quickly and earn

high profits, her best chances would be in the manufacturing sector.

Answer: TRUE

Explanation: Although manufacturing firms are difficult to start and keep going, they do have

the greatest potential for the high rates of growth that Valerie needs to achieve her primary goal.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

89) Jin Yang wants to start a small business. But he has not yet uncovered an opportunity that

would offer him security and the possibility of high profits. Jin Yang will likely find that one

must risk more in order to attain high profits.

Answer: TRUE

Explanation: Firms that offer security seldom offer the potential for rapid growth and high

profits, while firms that offer high profits tend to be associated with high levels of risk.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.90) The best way to learn about small business is to “bite the bullet” and start your own.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

91) Individuals wanting to learn about small business operations are advised to learn from other

entrepreneurs.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

92) Many entrepreneurs got the idea for their own business from their experience of working for

others.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

93) Since entrepreneurs are starting new businesses, experience gained from working for an

established business isn’t particularly helpful.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.94) Offering to manage an established business for a percentage of the profits plus a salary offers

experience to the would-be entrepreneur and free time to the business owner.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

95) Entrepreneurs are well advised to avoid starting businesses in the same market in which they

were previously employed.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

96) You can negotiate a win-win situation by offering to manage an established small business.

You win from the experience; the owner wins with free time.

Answer: TRUE

Explanation: Often it is difficult to start your own business when you lack the capital. One way

to become an owner is to offer to manage a business that is already established. You gain

experience and the owner gets free time.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.97) If you were to begin gathering information on a particular type of business, it is doubtful that

a community college class would benefit your search because the information you would gain is

too generic in nature.

Answer: FALSE

Explanation: Many community colleges bring together would-be entrepreneurs from diverse

backgrounds. These resources will often connect students with a network of other entrepreneurs

and small business owners. However, many tips for prospective small business owners are

universal in nature, such as keeping accurate financial records and finding out where to go to

learn how to do these things.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

98) There are several ethical considerations when starting a business, but competing against

current and former work relationships is always fair game.

Answer: FALSE

Explanation: Similar to managers who work for large organizations, small business

owners/managers must consider ethics when making decisions. The Making Ethical Decisions

box depicts a situation where two employees plan to quit their jobs and create a business that

directly competes against their current employer. Although they have a right to create a business

and compete, how they ethically compete for the same customers that their former employer

serves is the question.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Understand

AACSB: Ethics

Accessibility: Keyboard Navigation

99) Amir hopes to start his own business someday. He should not talk to other small business

owners about his plans because they might steal his ideas.

Answer: FALSE

Explanation: Talking to small business owners is one of the best ways to learn how to start and

run a small business.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.100) Riley worked as a floral designer at a floral shop in town before opening her own shop.

This approach to the business is okay, but her time would be put to better use starting her own

business.

Answer: FALSE

Explanation: Riley will gain valuable training and insights into the floral design business by

working for someone else. Her experience should reduce her risks and help her operate more

efficiently when she starts her own business.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Analyze

AACSB: Analytical Thinking

Accessibility: Keyboard Navigation

101) As an employee of a small business, Dante has heard the owner is getting ready to retire.

Since Dante would like to buy the business, he needs to determine how much the business is

worth. In order to determine a fair price for the business, Dante should add up the market value

of all of the firm’s physical assets such as buildings, machinery, equipment, and inventory, and

willingly pay this amount for the business.

Answer: FALSE

Explanation: A fair value for a business depends not only on what the firm owns, but also on

what it earns and what makes it unique.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

102) The two primary concerns of an entrepreneur starting a new business are planning and

record keeping.

Answer: FALSE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.103) According to the Small Business Administration, poor management is the cause of the

majority of small business failures.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

104) Business plans are necessarily a bit vague since these are prepared prior to the beginning of

business operations.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

105) A good business plan describes the nature of the proposed business, the target market, the

competitive advantages, and the qualifications of the owners.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

106) Bankers and investors require entrepreneurs to present a well-conceived business plan.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.107) Getting a business plan into the hands of the right people is nearly as important as getting

the right information in the plan.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

108) The entrepreneur’s integrity is not relevant to bankers when determining the

creditworthiness of a business loan.

Answer: FALSE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

109) Software designed to help create business plans has proven to be of little value because it is

difficult to apply it to every business situation.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

110) Since creating a detailed business plan is almost impossible, entrepreneurs should focus on

the other tasks needed to get their firm started.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.111) Management includes attention toward financing the business, hiring employees,

marketing, and record keeping.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

112) Identifying poor management as the cause of a small business failure likely covers a variety

of problems.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

113) Aside from personal savings, the only other viable source of financing for an entrepreneur

would be funds available from friends and family.

Answer: FALSE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

114) Potential suppliers can be an excellent source of financing for a new business since lending

money to a new customer may be very much in their own interest.

Answer: TRUE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.115) Angel investors are the government agencies that invest money in new companies before

they go public.

Answer: FALSE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

116) Venture capitalists provide funds for start-up businesses in exchange for part ownership in

the new firm.

Answer: TRUE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

117) State and local governments often act as venture capitalists.

Answer: FALSE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

118) While the Small Business Administration provides management advice to new business

owners, it is not empowered to provide financial assistance.

Answer: FALSE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.119) Venture capitalists provide funds for small businesses as part of their philanthropy

programs.

Answer: FALSE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

120) Venture capitalists prefer investing in smaller start-up businesses in order to reduce their

overall risk.

Answer: FALSE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

121) The Small Business Administration’s microloan program offers small businesses very small

loans.

Answer: TRUE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

122) Small Business Administration microloans are based on the borrowers’ integrity rather than

collateral and credit history.

Answer: TRUE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.123) In order to qualify for a microloan from the SBA, an entrepreneur must have adequate

collateral and a proven track record of success.

Answer: FALSE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

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124) Small Business Investment Companies (SBICs) are privately owned companies licensed by

the Small Business Administration to lend money to small businesses.

Answer: TRUE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

125) The SBA may guarantee loans made by a financial institution and repay them if the

borrowers stop making payments.

Answer: TRUE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

126) Success in running a business depends on knowing your customers, managing your

employees, and keeping efficient records.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.127) In the business world, a market consists of those people who have a willingness to buy a

particular product.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

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128) One of the greatest advantages that small businesses have over larger ones is the ability to

know their customers better and to adapt quickly to the customers’ needs.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

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129) Attracting qualified workers presents a problem for small businesses since they usually

offer less money, fewer benefits, and less room for advancement than larger firms offer.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

130) As their firms grow and prosper, busy entrepreneurs take pleasure in delegating authority to

others.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.131) Studies show that seniority is the most important criterion when selecting employees for

promotion to management positions.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

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132) Compared to employees of large businesses, small business employees are less satisfied

with their work because they see their jobs as less challenging.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

133) Hiring family members offers the best answer to the problem of attracting qualified

employees.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

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134) Questions about how much authority to delegate and to whom, are easier issues for family-

run businesses since they can’t fire family.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.135) With fewer employees and less revenue, small businesses have less need for detailed

records than do larger business organizations.

Answer: FALSE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

136) Many small business owners report that they needed assistance with accounting when they

first started businesses.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

137) Commercial loan officers and insurance agents offer expert assistance that can be valuable

to small business owners.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

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138) One way to control the legal costs associated with operating a small business is to purchase

a prepaid legal plan.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.139) Commercial loan officers serve as a resource for small business owners for information

regarding risk management.

Answer: FALSE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

140) Many more new entrepreneurs are turning to crowdfunding sites, like Kickstarter, to raise

funds for their endeavors.

Answer: TRUE

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

141) Management includes attention toward financing the business, hiring employees,

marketing, and record keeping.

Answer: TRUE

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.142) Prior to creating a business plan, discussions with bankers and investors can help

entrepreneurs determine the amount of financing available.

Answer: FALSE

Explanation: Bankers and investors will want to look at an entrepreneur’s business plan in order

to determine whether they are interested in providing funds. Entrepreneurs who are unable to

provide bankers and potential investors with a well-developed plan will appear disorganized and

unprepared.

Difficulty: 2 Medium

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

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143) An effective business plan analyzes the competition and identifies the resources required to

profitably serve a target market.

Answer: TRUE

Explanation: An effective business plan must consider all the aspects of operating a new

business in detail.

Difficulty: 2 Medium

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

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144) When writing a business plan, prospective entrepreneurs should remember to omit details

regarding their experience and education since investors are only interested in the proposed

business.

Answer: FALSE

Explanation: A business plan should include information about the resources and qualifications

of the owner.

Difficulty: 2 Medium

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.145) As opposed to venture capitalists, angel investors prefer to target their investments in new

firms requiring large sums of money.

Answer: FALSE

Explanation: Venture capitalists often invest in businesses in need of large sums of money.

Angel investors are private individuals investing their own money. The amount of money

invested by angel investors tends to be less than amounts invested by venture capital firms.

Difficulty: 2 Medium

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

146) A major advantage of preparing a formal business plan is that prospective entrepreneurs

must identify the resources and activities required to successfully operate their proposed venture.

Answer: TRUE

Explanation: Developing a business plan forces an entrepreneur to think carefully about all

aspects of the business he or she intends to start.

Difficulty: 2 Medium

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

147) Prospective entrepreneurs turned down by private lenders have little hope of getting

financial help from the Small Business Administration, since the SBA’s standards are even

tougher than those of private lenders.

Answer: FALSE

Explanation: The SBA offers a number of programs to help finance small businesses that have

difficulty obtaining loans from private sources. Sometimes the SBA will offer direct loans,

sometimes it will guarantee private loans, and other times it will combine both of these

approaches.

Difficulty: 2 Medium

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.148) If you plan to meet face-to-face with a banker or venture capitalist, it is not necessary to

submit a business plan.

Answer: FALSE

Explanation: A business plan is mandatory when talking to bankers and investors.

Difficulty: 2 Medium

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

149) In order to better serve their customers, small business owners should avoid delegating

authority to their employees.

Answer: FALSE

Explanation: Successful small businesses often grow beyond the ability of the entrepreneur.

Empowering employees produces highly motivated workers with higher job satisfaction. This

helps to improve customer service and reduces the wear and tear on the owner-manager.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

150) As a future entrepreneur, Brooke considered a variety of financing sources. Her discussions

with a venture capitalist revealed that this type of investor expects to receive a large ownership

interest in her firm.

Answer: TRUE

Explanation: Venture capitalists sometimes ask for as much as a 60% stake in a business.

Difficulty: 3 Hard

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.151) Hoping to qualify for a Small Business Administration microloan, Aliana’s business plan

clearly pinpoints her strategy to gainfully serve her target market. Unfortunately, her lack of

business experience and limited collateral greatly reduce her chances of obtaining the microloan.

Answer: FALSE

Explanation: Microloans are awarded on the basis of the integrity of the borrowers and the

soundness of their business ideas.

Difficulty: 3 Hard

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

152) Elliot’s long-time interest in and knowledge of computers enabled him to design a new hard

drive that is better than anything else on the market. Elliot’s product and business plan will likely

attract several sources of financing if he is willing to give up part ownership in his company.

Answer: TRUE

Explanation: Venture capitalists are individuals or companies that invest in new businesses in

exchange for partial ownership of those businesses. However, as a result of the bursting dot-com

bubble, many venture capitalists have reduced how much they are willing to invest in a high-tech

venture and have increased their required rate of return.

Difficulty: 3 Hard

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

153) Because college students realize the importance of nursing homes for our aging population,

students comprise an attractive market for nursing home insurance policies.

Answer: FALSE

Explanation: A market consists of people who have both a willingness to buy and the financial

resources needed to make the purchase. College students may lack both of these attributes.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.154) Preston believes his family-run business is more likely to avoid many of the problems

growing businesses have with managing employees. His attitude will likely hinder the growth of

his company.

Answer: TRUE

Explanation: Attitudes such as “You can’t fire family” or you must promote someone because

“they’re family” can be detrimental to family businesses.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

155) Rachel hopes to start her own business soon, but is concerned about her limited financial

resources. She should save money by waiting to meet with lawyers and accountants until the

business has grown and has been operating successfully for a few years.

Answer: FALSE

Explanation: Consulting with lawyers, accountants, and loan officers may be expensive, but

their advice may be invaluable. If Rachel waits for a few years before asking for legal and

financial advice, the money she saves on consulting fees is likely to be more than offset by losses

due to poor decisions and avoidable mistakes.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

156) The number of small businesses that export has increased dramatically recently.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.157) Large multinational firms dominate the international market, leaving few opportunities for

small businesses.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

158) One advantage enjoyed by small businesses in international markets is that overseas buyers

like dealing with individuals rather than large corporate bureaucracies.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

159) Due in part to government support, the majority of U.S. small businesses are involved in

exporting.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.160) Exporting offers small businesses opportunities to reduce their dependence on domestic

sales and extend product lives.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

161) Small Business Administration loans help firms finance their domestic operations. These

funds, however, cannot be used to finance exports since the money is provided by U.S.

taxpayers.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

162) Small businesses can provide more personalized service than a large corporation to

overseas customers.

Answer: TRUE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.163) The Internet has slowed small businesses’ participation in international markets.

Answer: FALSE

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

164) From a competitive standpoint, small businesses cannot expect to successfully compete

with large corporations in international markets.

Answer: FALSE

Explanation: Small businesses have certain advantages over larger rivals in international

markets. Overseas buyers often prefer to deal with individuals rather than corporate

bureaucracies. Moreover, small businesses can often begin shipping faster and offer more

personal service.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Understand

AACSB: Reflective Thinking

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165) The only real barrier preventing small businesses from exporting is insufficient knowledge

of the opportunities available.

Answer: FALSE

Explanation: Although many small businesses could profit from going international, there are

some serious barriers to small business exporting. Financing is often hard to obtain, dealing with

the bureaucratic paperwork involved in international transactions can be daunting, and the need

to adjust to cultural differences can complicate marketing efforts.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.166) As the owner of a small manufacturing business, Finn has an interest in exporting.

However, he doesn’t know how to get started. Fortunately, the government provides an

abundance of information to encourage entrepreneurs like Finn.

Answer: TRUE

Explanation: The Department of Commerce’s Bureau of Industry and Security and the Small

Business Administration provide export information on the Internet.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Apply

AACSB: Knowledge Application

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167) Kyle is a recent college graduate with a business degree. While still in school, he learned

that as a potential small business owner, he should focus his sights on domestic business only.

Answer: FALSE

Explanation: The world market is much larger and more lucrative than just the U.S. market.

Small and medium-sized business accounted for 99% of the growth in exporting firms in recent

years.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

168) Entrepreneurship is

A) managing businesses for others.

B) a controlling interest in the ownership of a corporation.

C) managing businesses that operate in multiple countries.

D) accepting the risk of starting and running a business.

Answer: D

Difficulty: 1 Easy

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

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written consent of McGraw-Hill Education.169) Which of the following U.S. issues does entrepreneurship most directly affect?

A) The political process

B) The ability to create jobs for others

C) Contributions of money to organizations that help people in need

D) The ability to influence national macroeconomics polices

Answer: B

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

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170) Which of the following explains why individuals accept the risks of business ownership?

A) The potential for learning how to be self-disciplined

B) The sense of self-satisfaction and independence

C) The challenge of seeking power

D) The desire to work fewer hours

Answer: B

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.171) Which of the following is a characteristic of successful entrepreneurs?

A) Power-seeking

B) Relies heavily on others who believe in the business

C) Willingness and desire to follow others

D) Action-oriented

Answer: D

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

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172) Which of the following best describes entrepreneurial personality traits?

A) Tolerant of uncertainty and highly energetic

B) Risk averse and self-nurturing

C) Appreciative of direction from others and risk averse

D) Preference for working fewer hours and letting others do the footwork

Answer: A

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

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written consent of McGraw-Hill Education.173) A(n) ________ is a group of experienced professionals from different areas of business who

join together to develop, make, and market a new product.

A) entrepreneurial team

B) joint venture

C) self-directed functional team

D) managerial task force

Answer: A

Difficulty: 1 Easy

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

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174) An entrepreneurial team consists of

A) managers with similar skills, abilities, and interests.

B) experienced professionals from different areas of business.

C) a group of wealthy investors who share a vision for a product.

D) representatives from management, labor, and the government who work together to solve a

company’s problems in a creative way.

Answer: B

Difficulty: 1 Easy

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.175) Business owners who prefer to maintain their businesses at a manageable size are called

A) macropreneurs.

B) intrapreneurs.

C) micropreneurs.

D) home workers.

Answer: C

Difficulty: 1 Easy

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

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176) One of the challenges of running a home-based business is

A) an increase in business risk.

B) managing the extra time on your hands.

C) keeping work and family tasks separate.

D) burdensome tax laws.

Answer: C

Difficulty: 1 Easy

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.177) A creative person working within a corporation to launch new products and generate new

profits is known as a(n)

A) arbitrator.

B) micropreneur.

C) macropreneur.

D) intrapreneur.

Answer: D

Difficulty: 1 Easy

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

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178) The goal of an intrapreneur is to

A) improve quality control in a corporation’s production process.

B) develop new products and generate new profits for the corporation.

C) implement cost control policies for existing products.

D) create smaller companies within larger companies.

Answer: B

Difficulty: 1 Easy

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.179) The U.S. government’s Immigration Act of 1990

A) encouraged entrepreneurs to come to the U.S. through “investor visas.”

B) established a government program to teach American workers displaced by immigration how

to start their own businesses.

C) established guidelines to help entrepreneurs recruit legal aliens as a source of low-cost labor.

D) proposed an exchange program for American and European entrepreneurs to temporarily live

internationally in order to open up foreign branches for their businesses.

Answer: A

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

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180) Enterprise zones are specific geographic areas that

A) the government has set aside for major corporations that promise to spend at least $10 million

to create new jobs.

B) attract business investment by offering lower taxes and government support for development.

C) the government has recognized as having the fastest growth rates in the country.

D) are characterized by government ownership of small businesses.

Answer: B

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.181) Business incubators are usually government-funded facilities intended to

A) provide health care benefits for small business owners and their families.

B) offer start-up firms low-cost office space and basic business services.

C) help rebuild the nation’s infrastructure.

D) assist foreign investors in identifying business opportunities in the U.S.

Answer: B

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Remember

AACSB: Reflective Thinking

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182) Historically entrepreneurs in the U.S.

A) created wealth for themselves, but have had a minor impact on the economy as a whole.

B) started many small firms that later became major corporations employing thousands of

workers.

C) experienced success only when they worked in partnership with the federal government.

D) played an important role, but are less important now in creating jobs and wealth.

Answer: B

Explanation: The history of the U.S. economy is full of examples of entrepreneurs that started

small businesses that later became major corporations. Examples from the past include Henry

Ford (Ford Motor Company), George Eastman (Kodak), and William Procter and James Gamble

(Procter & Gamble). More recent examples include Steve Jobs (Apple Computer), Bill Gates

(Microsoft), Chad Hurley and Steven Chen (YouTube), Ted Turner (CNN), and Jack Dorsey

(Twitter).

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

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written consent of McGraw-Hill Education.183) Which of the following statements explains one of the reasons that people in the U.S. take

the entrepreneurial challenge?

A) It’s all about profits, and the chance to make a lot of money.

B) It’s about independence and the opportunity to share in the American dream.

C) It’s about power and fame.

D) It’s about a lot of things, but it does not include personal achievement.

Answer: B

Explanation: Although the opportunity to earn big profits is certainly attractive to most

entrepreneurs, it is certainly not the only reason. Many entrepreneurs do not enjoy working for

others and become entrepreneurs because of the opportunity for independence. Others want the

opportunity to share in the American dream.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

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184) Successful entrepreneurs are self-nurturing. This means they

A) look to others for strength and encouragement.

B) self-finance their business with no assistance from others.

C) perform all business operations by themselves.

D) believe in themselves and their ideas.

Answer: D

Explanation: Self-nurturing individuals have the ability to believe in an idea when no one else

does, and to replenish their enthusiasm.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

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written consent of McGraw-Hill Education.185) Which of the following statements is characteristic of entrepreneurs?

A) They like certainty.

B) They have the ability to visualize a clear path.

C) They look at problems and see opportunities.

D) They prefer to be inventive rather than worry about whether the invention solves a customer

need.

Answer: C

Explanation: A common characteristic of entrepreneurs is that they like to solve problems. They

view a problem or a need as an opportunity.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

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186) Although successful entrepreneurs are more tolerant of uncertainty,

A) they seldom start another business after a failure.

B) they develop mental games to see themselves through the risk game, especially.

C) they always protect themselves from failure by taking out lots of insurance.

D) they strive to take calculated risks.

Answer: D

Explanation: Although tolerant of uncertainty, successful entrepreneurs prefer to take calculated

risks. This means that they will explore environmental trends, and do their best to quantify

opportunities before taking chances.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

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written consent of McGraw-Hill Education.187) Effective entrepreneurial teams combine

A) creativity with marketing and production experience.

B) venture financing, tax benefits, and production economies.

C) scientific abilities, capital investment, and marketing skills.

D) risk tolerance, debt financing, and international experience.

Answer: A

Explanation: The purpose of an entrepreneurial team is to bring together the skills needed to

create, produce, and market a new product.

Difficulty: 2 Medium

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

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188) Successful entrepreneurial teams

A) quickly organize themselves like large corporations.

B) assign only one person to new product innovation.

C) bring a variety of talent to the business venture.

D) outsource most of the details of innovation.

Answer: C

Explanation: As its name implies, members of an entrepreneurial team operate as a team.

Everyone works together to conceive, develop, and market the product. Team members can

combine their talents and creative skills, and bring a variety of expertise to the team.

Difficulty: 2 Medium

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

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written consent of McGraw-Hill Education.189) One reason we have seen continued growth in home-based businesses is

A) the location offers a more secure operational environment.

B) affordable technology makes it easier to compete.

C) people need something to do while they wait to return to work for a large corporation.

D) it is less risky to start a home-based business than other types of entrepreneurial ventures.

Answer: B

Explanation: Technology has helped level the playing field between large and small businesses.

Entrepreneurs can now use affordable technology right at home.

Difficulty: 2 Medium

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

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190) Which of the following best describes the difference between an intrapreneur and an

entrepreneur?

A) Intrapreneurs start nonprofit organizations while entrepreneurs start profit-seeking businesses.

B) Intraprenuers are practical while entrepreneurs are creative.

C) Intrapreneurs work within existing corporations while entrepreneurs assume the risks of

starting their own business.

D) Intrapreneurs limit their efforts to financial investments, while entrepreneurs are involved in

the management of all areas of a business.

Answer: C

Explanation: Intrapreneurs are creative people who work within a corporation to develop new

products and generate new profits for the firm. Entrepreneurs start their own businesses, without

any financial tie to a larger company.

Difficulty: 2 Medium

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

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written consent of McGraw-Hill Education.191) Intrapreneurs make use of ________ to develop and launch new products and generate new

profits.

A) their employer’s existing human, financial, and physical resources

B) their own personal financial resources

C) government-supplied physical and financial resources

D) old ideas abandoned by entrepreneurs

Answer: A

Explanation: The idea behind intrapreneurship is to use a company’s existing financial, human,

and physical resources to launch new products and generate new profits.

Difficulty: 2 Medium

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

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192) Enterprise zones are

A) government-owned properties that are available for entrepreneurial ventures at a reduced cost.

B) similar to incubator facilities but strictly run by city and state governments.

C) blighted areas that contain toxic materials making them unsuitable for business operations.

D) specific locations across the U.S. where entrepreneurs can set up shop and receive tax breaks

for operating in these areas.

Answer: D

Explanation: Enterprise zones are geographic areas where the government would like to

encourage business development. City and state governments will provide business owners tax

concessions for developing businesses in these areas.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

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written consent of McGraw-Hill Education.193) Enterprise zones and investor visas are examples of

A) government policies that favor large corporations rather than small businesses.

B) government programs that encourage economic growth through entrepreneurship.

C) government policies designed to encourage intrapreneurs.

D) examples of private initiatives to reduce the government’s role in the economy.

Answer: B

Explanation: Investor visas are designed to attract entrepreneurial immigrants, while enterprise

zones are low tax areas where the government offers support services to help new businesses.

While these are very different strategies, the purpose of both is to encourage entrepreneurial

behavior.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

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194) State and city governments have promoted facilities where new businesses can open up

shop and share common services such as secretarial, accounting, and legal services. Due to their

remarkable success rate, ________ continue to grow in popularity.

A) enterprise zones

B) incubators

C) intrapreneurial development centers

D) venture farms

Answer: B

Explanation: Incubator facilities offer new businesses low-cost office space with shared

receptionist/secretarial, legal, and accounting services.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

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written consent of McGraw-Hill Education.195) The Spotlight on Small Business box “Student Startups” features students who

A) directed inheritance money they received into profitable business ventures.

B) turned a passion into a business opportunity.

C) realized the American dream at a very young age, and now run multimillion-dollar

companies.

D) convinced banks to fund their business ideas.

Answer: B

Explanation: The Spotlight on Small Business box features several young persons who turned a

passion or a problem into a business opportunity.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Understand

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196) Angelina recently left her job at a large corporation to start her own business. She knows

that her decision comes with risk, but she is excited to be her own boss and to tackle the

challenges that running her own company will bring. Angelina is an example of a(n)

A) intrapreneur.

B) entrepreneur.

C) venture capitalist.

D) raconteur.

Answer: B

Explanation: An entrepreneur is someone who accepts the risks of starting and running a

business.

Difficulty: 3 Hard

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

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written consent of McGraw-Hill Education.197) Laila created a new piece of workout gear. She’s calling it the Toned Tushie. Although she

couldn’t initially find potential investors, she secured a personal loan and borrowed additional

money from her parents. Her drive to continue believing in her idea and to remain enthusiastic

shows that Laila is

A) characteristically self-nurturing.

B) better suited to managing a nonprofit organization.

C) unaware of the risks she was taking.

D) not a true entrepreneur.

Answer: A

Explanation: Self-nurturing individuals are able to continue believing in an idea and are able to

replenish their enthusiasm even when others do not offer support.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

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198) Apple’s legendary smart team is an example of a company that succeeded by

A) encouraging each manager to focus on a well-defined area of the business and build his own

specialized department.

B) bringing together a group of talented and experienced managers to conceive, develop, and

market products.

C) emphasizing a low price and low-cost strategy right from the beginning.

D) assembling a group of employees whose inexperience was a plus, because they did not come

with the baggage and institutional ideas of larger companies.

Answer: B

Explanation: Apple’s smart team is an example of an entrepreneurial team—a group of

experienced managers who worked together to conceive, develop, and market products.

Difficulty: 3 Hard

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

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written consent of McGraw-Hill Education.199) Elise recently quit her job at a well-known insurance company and started a home-based

business preparing medical transcriptions for doctors. Based on recent statistics, she can expect

A) a negative reaction from friends and family who wonder when she will get a real job.

B) the emergence of affordable technology will make it less challenging for her to compete with

larger firms offering the same service.

C) the government will discourage her attempts to create a home-based business in the hopes that

she will opt for locating in an enterprise zone.

D) to find security, routine, and a paycheck from her new enterprise.

Answer: B

Explanation: Technology has leveled the competitive playing field enabling home-based

businesses to look and act as big as their corporate competitors. E-based business activities allow

small firms to reach new markets.

Difficulty: 3 Hard

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

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200) Eddie is an inventive engineering new graduate who just started working for a large

company that makes medical products for both hospital and patient use. One of his primary

responsibilities is to initiate and develop new products to complement the firm’s current product

line. Eddie’s position is ________.

A) intrapreneurial

B) entrepreneurial

C) an outside consultant for other firms

D) micropreneurial

Answer: A

Explanation: Intrapreneurs are creative people who work as entrepreneurs within corporations to

create new products that will provide returns on investment.

Difficulty: 3 Hard

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

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written consent of McGraw-Hill Education.201) Northeast City College received a government grant to create a business incubator. Once

completed, Northeast City College’s facility will offer

A) local government agencies assistance in obtaining funds for urban renewal.

B) area businesses advice on employee benefits and ways to reduce taxes.

C) venture capitalists an opportunity to identify new entrepreneurs.

D) new businesses low-cost office space with basic business services.

Answer: D

Explanation: Incubators are created to reduce the start-up capital needed by new firms.

Incubators offer assistance in the critical stage of early development with services such as

accounting, legal advice, and secretarial help.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

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202) Tucker is an intrapreneur for a multinational wearable electronics company. Which

statement best describes Tucker’s duty?

A) He is expected to recruit new managerial talent for his firm.

B) He will use the firm’s existing resources to develop new products.

C) He is concerned mainly with improving the firm’s public image.

D) He will concentrate on creating new ventures that can be spun off to become independent

firms.

Answer: B

Explanation: An intrapreneur uses a firm’s existing financial, human, and physical resources to

create new products and generate new profits.

Difficulty: 3 Hard

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

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written consent of McGraw-Hill Education.203) Matteo just left the Army after 20 years of service. During his service, he managed to save a

little money and is now entitled to a government pension. His wants to go back to his home state

of Arizona and start manufacturing small, solar-powered panels for residential use. Although he

knows he needs a storefront and an industrial site, he is not 100 percent convinced about where

to locate. However, he does know for certain that one of his top priorities is to limit his tax

liability associated with this new business. What would you suggest for Matteo?

A) He should make certain he is deeply passionate about the product he is developing, before he

explores the need.

B) He should keep it small, especially in the beginning.

C) He should take out a lot of insurance in case he finds out that he has not paid enough taxes.

D) He should check out the enterprise zones in Arizona.

Answer: D

Explanation: Enterprise zones are geographic areas usually set up by state governments. In order

to attract small business to these areas, the government provides tax breaks if a business decides

to locate its operation in one of these zones.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

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written consent of McGraw-Hill Education.204) Caleb inherited a successful dry cleaning business from his parents. Just as his parents did,

he offered high-quality service to all the customers he served. As the surrounding towns grew,

several customers recommended that Caleb expand the business to offer service in new locations.

He chose to maintain only one operation, so as not to lose control and to keep his work life and

home life balanced. Caleb is a good example of a(n) ________.

A) small business affiliate

B) intrapreneur

C) micropreneur

D) enterprise zone participant

Answer: C

Explanation: Micropreneurs are interested in a balanced lifestyle. They generally like what they

are doing and do not aspire to grow the business. They know they can be content remaining

small and producing quality products and services to their limited market.

Difficulty: 3 Hard

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

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205) Located at Monsanto’s world headquarters, the Nidus Center is a unique ________ facility.

The tenants are biotechnology companies who are at various stages of product development. The

agricultural giant, Monsanto, the Danforth Foundation, Washington University-St. Louis, Saint

Louis University, and several venture capital firms contribute seed money for these small start-

up ventures that receive approval to further develop their ideas at the Nidus Center.

A) incubator

B) intrapreneurial

C) enterprise zone

D) micropreneurial

Answer: A

Explanation: Incubator facilities offer new businesses in the critical stages of early development

low-cost offices, and in this case, laboratory space and shared business services.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Apply

AACSB: Knowledge Application

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written consent of McGraw-Hill Education.206) Small businesses

A) deal with similar management issues that large companies face.

B) deal with very different management issues due to the very different management challenges

experienced by small businesses.

C) do not seek government funding due to the fact that the federal government has made it very

clear that it must support large operations before small operations.

D) concern themselves with state-of-the-art information and accounting technology but not

employee relations due to their challenge to financially support employee benefits programs.

Answer: A

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

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207) The Small Business Administration defines a small business as a firm that:

A) has fewer than 100 partners.

B) is independently owned but not dominant in its industry.

C) is dominant in its industry, but small in the number of workers it employs.

D) has annual receipts of more than a specified amount depending upon the industry.

Answer: B

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

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written consent of McGraw-Hill Education.208) Small businesses create about ________ percent of the new jobs in the United States.

A) 25

B) 45

C) 65

D) 85

Answer: C

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

AACSB: Reflective Thinking

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209) A business’s size is measured

A) in relation to the number of competitors in its industry.

B) in relation to other firms in its industry.

C) in relation to the number of dominant competitors in its sector.

D) as small, if it participates in the services sector.

Answer: B

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

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210) Some people argue that small business failures are

A) lower than traditionally reported.

B) understated to keep small business creation enthusiasm.

C) accurate and alarming.

D) inconclusive.

Answer: A

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Remember

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written consent of McGraw-Hill Education.211) When comparing small businesses to their larger competitors, it is clear that

A) bigger is always better.

B) small firms can always outperform big firms on a level playing field.

C) small firms often can offer more personalized customer services than big firms.

D) small firms are slower to respond to opportunities than are large firms.

Answer: C

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

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212) Small businesses are important to the U.S. economy because

A) they fill in the gaps when large businesses want to let workers go on vacation or when large

businesses want to temporarily cease production.

B) banks and other financial services companies would not have borrowing customers, because

small businesses borrow more than large businesses.

C) they pay most of the tax revenue collected by the U.S. government.

D) they create about 65% of new jobs each year and generate over 50% of the U.S. GDP.

Answer: D

Explanation: According to the textbook, small businesses contribute to a significant amount of

yearly job creation and account for more than 50% of the U.S. gross domestic product.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Understand

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written consent of McGraw-Hill Education.213) Using the analogy of boulders vs. sand for filling a hole, the textbook points out that

A) small businesses are employing a record number of employees because they have to work

twice as hard at producing the same amount of output as a large competitor.

B) small businesses can serve niche markets that larger firms do not serve well.

C) the sand represents the small businesses that start and fail each year, while the boulders

represent the large companies whose resources permit them to stay the course.

D) large companies serve market niches so much better than small companies.

Answer: B

Explanation: There are lots of opportunities and plenty of room for small companies to serve

small underserved markets. The boulders represent large firms, who leave a lot of space in the

hole which smaller firms represented by grains of sand can fill.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Understand

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214) Which of the following employment statistics about small businesses is true?

A) Small businesses create about 15% of all new jobs in the U.S.

B) The number of women owning small businesses has remained constant.

C) A great majority of American workers find their first jobs with a small business.

D) Growth of minority-owned businesses in the U.S. is declining.

Answer: C

Explanation: Small businesses create about 65% of all new jobs in the U.S. The number of

women and minorities owning small businesses has increased rapidly. About 80 percent of

Americans find their first jobs in small businesses.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Understand

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written consent of McGraw-Hill Education.215) According to SBA guidelines, a manufacturing firm with 1,000 employees

A) would be classified as a large firm in the industrial sector.

B) may be classified as a small business depending upon the size of others in the same industry.

C) is too small to achieve the efficiencies of large-scale production.

D) is classified as an S corporation.

Answer: B

Explanation: The criteria used by the SBA differ according to the type of firm. In

manufacturing, a firm can have up to 1,500 workers and still be classified as a small business.

However, the SBA classifies a firm as small only in relation to other businesses in its industry.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Understand

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216) Which of the following statements accurately depicts an advantage that small business has

over big business?

A) If the small business owner can project his business as being big, if not very similar to big

businesses that sell in the same industry, then he will realize a significant advantage.

B) The size of the business (small being better in this case) is an important consideration in the

management of legal, payroll, and tax concerns.

C) A small business can maneuver and change quicker than most large businesses can. It can

react to market conditions and customer concerns much faster.

D) The slower pace of small businesses translates into better quality for its customers.

Answer: C

Explanation: Typically, small businesses can react to customer needs and embrace change at a

faster pace. An advantage is the ability to know their customers better and to adapt to customer

needs.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.217) Entrepreneurs looking for a business that gives them the best opportunity to get rich should

consider starting a business in

A) the manufacturing sector.

B) the food service industry.

C) a low-risk industry.

D) the agriculture sector.

Answer: A

Explanation: Businesses with the greatest potential to make the owner rich are those that are

both hard to start and hard to keep going (manufacturing).

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

218) A review of small business successes and failures indicates that the

A) businesses that are easiest to start offer the greatest potential for long-term growth and profits.

B) restaurant industry offers the least risk for entrepreneurs.

C) businesses with the potential for high profit levels tend to be difficult to start and hard to keep

going.

D) reason the service sector is rapidly growing is that these firms are easy to start and keep

going, and offer high levels of security and growth potential.

Answer: C

Explanation: Firms that offer growth, and the potential for high profits, are often the same

businesses that are hard to start and hard to keep going.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.219) Manuel is focusing his attention on finding full-time employment now that he has

graduated. He has decided to narrow his job search to jobs with a major corporation and ignore

the possibility of working for a small business. His job search strategy

A) makes sense because managerial skills are best developed by working for big firms.

B) is smart because major corporations represent the most important source of employment

growth in the United States.

C) indicates that Manuel’s passion is to fulfill his dream of owning his own business.

D) will likely limit his job prospects since most new jobs are with small businesses.

Answer: D

Explanation: In recent years many major corporations have downsized. The text identifies

statistics that small businesses create 65% of new jobs, and 80% of Americans find their first

jobs in small businesses.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Apply

AACSB: Knowledge Application

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220) Quinn has landed a management position with a pioneering new small business after many

years of working as a regional manager for a nationally known nonprofit. As Quinn starts her

new job, she is likely to find that

A) due to the significant differences in large and small firms, her previous experience will be of

little value in her new position.

B) the principles of management are much the same at large and small firms.

C) nonprofit organizations are motivated by their desire to help people and so financial

management is of little concern.

D) planning is more important to a nonprofit organization and less important to a small business

so she will need to adjust the time she spends on the planning function.

Answer: B

Explanation: The principles of managing a small business are very similar to those needed to

manage a large corporation or a nonprofit organization such as a charity.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.221) As a result of recent downsizing at his firm, Dominic lost his job as an IT manager for a

large telecommunications company. A true, self-confirmed computer nerd, Dominic knew that

several of his past contacts often outsourced their computer problems. He decided it was a good

time to test the waters and see if he could secure enough computer clients to be in business for

himself. His success demonstrated that

A) starting your own business can quickly provide security and profits.

B) people always tend to hire people they know from past associations.

C) the service sector is not an area of significant growth.

D) successful big businesses often create profitable opportunities for small businesses.

Answer: D

Explanation: As big businesses downsize, they often find that they do not always have the staff

they need and are increasingly contracting with small companies to temporarily fill their needs

through outsourcing. Big businesses don’t serve all the needs of the market. There is plenty of

room for small companies to make a profit filling those niches.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.222) Ariana, a talented photography student, started her own photography business. She planned

to solicit jobs from large corporations, which would need headshots and other pictures for their

annual reports and websites. Although filling a unique niche, Ariana needed the security that the

business would thrive and that she would earn enough to support herself and her family. She also

hoped she would spend less time each day calling on potential clients and more time doing the

actual shoots. As her small business consultant, which of the following suggestions would you

have for Ariana?

A) Ariana should either take the risk necessary to develop a small business, or go to work for

someone else.

B) In the beginning, it’s doubtful that Ariana will realize ease of entry, security, and good profits.

She needs to make plans in the event that one or more of these does not materialize quickly.

C) Photographers can take pictures of a multitude of things. It’s probably not good strategy to

limit her business to only photographing the needs of large corporations.

D) Ariana should definitely make time for herself each day so that she does not experience

burnout. If she plans well, leaping into her own business will provide her with several hours of

unstructured time each day where she can perfect her craft even more.

Answer: B

Explanation: Prospective small business owners should be aware that it is unlikely that ease of

entry into a market, security, and reward will come all at once. At least in the beginning, if you

need security, you may have to pursue the business idea on the side. However, the trade-off is

that you will probably have to forego rapid rewards since you are spending only part of your

time in developing the business.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.223) Dr. Pearl White just graduated from dental school. She is hoping to acquire the necessary

funding to start her own dental practice. One advantage of this type of business is

A) above-average opportunity to borrow funds at a high interest rate.

B) nearly unlimited growth potential.

C) the service is individualized and not easily mass-produced.

D) very low start-up costs.

Answer: C

Explanation: Healthcare businesses that require advanced technical degrees to get licensed

generally have a good chance of success due to the individualized attention necessary to perform

the service.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

224) Maya opened a bakery in a seaside resort town. She was positive she had the perfect

location as plenty of hotels and inns were within walking distance of her storefront. She planned

to use her grandmother’s recipes and only the finest ingredients for her upscale resort customers.

During her first week of business, she was disappointed with lackluster sales. When she drove

past the regular breakfast-style restaurants and even the nearby Starbucks, she noticed they were

rather bustling. Maya most likely

A) did not publicize in the appropriate places.

B) underestimated the competition.

C) should have considered weather conditions before assuming that her business would be

vibrant.

D) did not consider that small businesses never get the name recognition in resort towns that

larger businesses and franchises realize.

Answer: B

Explanation: Underestimating the amount of competition in your service area is a reason some

small businesses falter or fail.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.225) Austin, Aiden, and Zara wanted to open A2Z Sports Bar that serves a unique offering of

beer, weekend entertainment, and a limited menu of appetizers. In one of the preliminary

meetings, Zara presented a list of reasons that small businesses fail. Although many of the ideas

on this list were applicable to many types of business, one challenge pertained specifically to the

restaurant and bar business. The challenge he referred to was

A) underestimating how much time it will take to build a market.

B) borrowing money without planning just how and when to pay it back.

C) carrying habits of personal extravagance into the business.

D) some of the easiest businesses to start have the least growth prospects and greatest failure

rates.

Answer: D

Explanation: The easiest businesses to start have the least growth prospects and greatest failure

rates. An example of a business that is easy to start is the restaurant or bar business.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.226) Scarlett is graduating from culinary school soon and she often imagines opening her own

comfort food restaurant. Her other passion is skiing in Colorado, where she travels to four or five

times every year. As her small business advisor, you believe it necessary to provide her with

information that will help her make good business decisions. Which of the following would be

helpful for Scarlett to know?

A) Restaurants are relatively easy businesses to start, but are labor intensive and also have the

greatest failure rate.

B) Restaurants are not the easiest type of business to start, but once you get it going, you will

have plenty of time for skiing.

C) Most restaurant owners get rich if they open their own, independent restaurant as opposed to

starting a franchised operation.

D) Franchised operations will take less time on the part of the owner than a regular

independently owned operation. If she opens a franchise, she will have more time for creativity

in the business, and more time for skiing too.

Answer: A

Explanation: Restaurants fall into the category of a relatively easy business to start, but with not

much growth rate, and a high risk of failure. Businesses with the highest profit potential are also

those that are more difficult to start. Usually the start-up funds are prohibitive for many

entrepreneurs.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

227) A small business management course at a community college may offer entrepreneurs an

opportunity to

A) meet with experienced entrepreneurs and learn from their advice.

B) try out ideas on a computer simulation before risking real time and money.

C) listen to a qualified instructor solve all of the problems of small business owners.

D) be part of a group that will include angel investors.

Answer: A

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.228) One way to get into business is to buy an existing company. The value of the business used

to determine a fair purchase price is based on

A) the prospects for business competition.

B) the current owner’s retirement plan.

C) the amount of government contracts the company has.

D) the value of what the business owns, what it earns, and what makes it unique.

Answer: D

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

229) Conversations with people who start their own business often reveal that

A) many small business owners got their entrepreneurial idea from a previous job.

B) it is unusual for experienced corporate managers to start their own businesses.

C) the most successful entrepreneurs often start their business ventures right after high school.

D) most small business owners begin with significant personal wealth.

Answer: A

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

230) For prospective entrepreneurs, enrolling in an introduction to business or small business

management course offered through their community college

A) is likely to be wasted time since college courses tend to be too theoretical.

B) can be helpful by offering them an opportunity to meet experienced small business owners.

C) serves as supplementary information, only after starting their business venture.

D) seldom provides you with information to help make small business decisions.

Answer: B

Explanation: One of the best things about small business courses offered by community colleges

is that they can bring together entrepreneurs. The advice experienced entrepreneurs can share

with those just getting started can be invaluable.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.231) Which of the following suggestions would an experienced business owner offer to help

someone who is thinking about starting a business venture?

A) Avoid the temptation of buying an existing firm. Build your own reputation and make your

own mistakes.

B) Gain experience by working for a successful businessperson.

C) Postpone consulting with an accountant or lawyer until you can afford their services.

D) Jump in quickly, before the market conditions change and opportunities are lost.

Answer: B

Explanation: Experienced entrepreneurs regularly state that there is no better way to learn small

business management than by working for a successful businessperson.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

232) Successful small business owners are

A) not good sources for information on starting your own business because they generally do not

understand failure.

B) valuable sources for information since you can learn from their experiences.

C) good sources of information but risky since their keen sense of sniffing out something with

potential will tempt them to steal your ideas.

D) valuable sources of information, but you should proceed with caution because talking with

someone who could eventually be your competitor may cross the line due to federal trade

commission laws.

Answer: B

Explanation: An excellent way to learn how to run a small business is to talk to others who have

already done it.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.233) When starting a small business, it’s important to remember

A) an affinity for taking large amounts of risk is the critical factor in achieving small business

success.

B) doing things differently from previous entrepreneurs is the real key to success.

C) learning from others and gaining relevant business experience improves the odds for success.

D) to avoid burnout, limit the number of hours you work each week as you adapt to the rigors of

self-employment.

Answer: C

Explanation: Learning from others and getting some experience are two keys to achieving

success in small business.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

234) The Making Ethical Decisions box “Should You Stay or Should You Go?” addresses a

dilemma worthy of consideration. It describes

A) an unethical situation where the business owner’s need for capital causes him/her to delay all

payments to suppliers for 120 days, forcing several of his close business relationships out of

business.

B) the slow death of a business and how important it is to delay payments, sell off assets, and do

everything possible to save a failing business except dismissing employees who need their jobs

for survival.

C) ethical decisions that need to be considered when employees leave a faltering business to start

their own, eventually competing against their previous employer.

D) the unethical and disloyal decision to leave your family business and start your own, taking

with you all the family business’s trade secrets.

Answer: C

Explanation: The box describes a situation where employees have ideas of how to make a failing

business model successful. They choose to leave the faltering company and go out on their own.

As competitors, do they seek to communicate directly with their previous employer’s loyal

customers, or is this strategy unethical? The box asks the student to explore the alternatives and

the consequences.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.235) Long-motivated by his wish to operate his own business, Andrew is considering purchasing

an existing business. As he carefully weighs this option, he is likely to find that

A) very few owners of small businesses have any interest in selling.

B) his potential for success would greatly improve if he started his own new firm.

C) the value of an existing business is determined by what the business owns, what it earns, and

what makes it unique.

D) any entrepreneur willing to sell his/her business is experiencing serious financial problems.

Answer: C

Explanation: The value of a firm is based on three things: what it owns, what it earns, and what

makes it unique.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

236) Lily, an upperclassman at Riverside College, hopes to start her own business after

graduation. In an effort to learn as much as she can about small business management, she talked

to four friends who each offered their advice. Which of these suggestions is likely to help her the

most?

A) The best way to learn about running a business is by getting hands-on experience. You should

quit school and put your dream into action.

B) Take courses related to small business management and then look for a job with a successful

businessperson, preferably in your field of interest.

C) Since every business is unique, don’t worry about advice from others. Go to a bank, get a

business loan, and live your dream.

D) Starting and managing a small business requires little more than common sense. If your idea

is unique, hard work will guarantee your success.

Answer: B

Explanation: College courses will allow Lily to interact with others interested in small

businesses, including experienced entrepreneurs, whose advice can be invaluable. Perhaps the

best way to learn about running a small business is to get some experience by serving as an

apprentice for a successful business.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.237) Isaac benefited from his experience working for an established private company that

provided state-of-the-art lighting for music venues around town. Although confident that he

could start his own lighting business, he had limited capital to buy the necessary equipment

needed to successfully compete with established companies. Which of the following strategies

would best help Isaac achieve his goal of business ownership?

A) Begin by offering to take over management of his employer’s business, allowing the owner to

enjoy some leisure time.

B) Consider working for a major corporation, live modestly, and save until he has sufficient

funds to start his business.

C) Enroll in the closest university and apply for student loans.

D) Open his business and trust that his work experience will bring him success even with

insufficient capital.

Answer: A

Explanation: Small business owners work long hours and rarely take vacations. After many

years, they may want to enjoy some leisure time, but feel trapped by the need to always be there.

This offers an opportunity for aspiring entrepreneurs to learn all about a particular business and

perhaps share in the profits while at the same time help the owner realize a better work-life

balance.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.238) Mike remembers his grandfather telling him, “If you can find something you like to do, and

somebody is willing to pay you to do it, that’s the secret to a great life.” The way Mike saw it,

this was his chance. For the past five years, he’s been splitting his time between school and

working at a local tree farm. The owner recently announced he was ready to retire. As Mike

began creating a business plan, he contemplated what the business might be worth. How much

will he need to buy this business? For starters, Mike

A) needs to find a government database that outlines what nursery businesses are worth, on

average, across the country.

B) should speak with the current owner and determine the total value of assets (what the business

owns), its earning potential, and its unique advantage.

C) will want to determine the assessed value of the acreage that the business owns, and then bid

competitively.

D) needs to understand that it’s difficult to buy an existing business, rather than start your own.

The key will be to meet with the company’s accountant, and explain your interest. The

accountant will have all the answers.

Answer: B

Explanation: When preparing to buy an existing business, a good start is to determine the total

value of what the business owns; what the business earns and future potential earnings; and what

makes the business unique in its industry.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-03 Summarize ways to learn about how small businesses operate.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

239) Two key management functions that need particular attention when starting a business are

A) human relations and accounting.

B) planning and financing.

C) marketing and public relations.

D) staffing and controlling.

Answer: B

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.240) A ________ is a written document that details the business idea, the target market and the

business’s competitive advantage, financial resources available for the business, and the

qualification of the management.

A) feasibility product

B) marketing plan

C) business plan

D) statement of intent

Answer: C

Difficulty: 1 Easy

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

241) The business plan will include ________.

A) an analysis of the competition

B) names of banks the owner plans to visit

C) import/export information

D) names of employees

Answer: A

Difficulty: 1 Easy

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

242) A detailed written statement that describes the nature of the business, the target market, the

firm’s competitive advantages, as well as the owner’s resources and qualifications is a

A) business plan.

B) entrepreneurial mission statement.

C) profit and loss statement.

D) professional action plan.

Answer: A

Difficulty: 1 Easy

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.243) Entrepreneurs seeking financial support from bankers and potential investors should

A) be vague regarding their creative business plan to avoid having their idea stolen.

B) seek the bankers’ and investors’ assistance in developing their business plan.

C) create a detailed business plan to help the bankers and investors understand why this business

will succeed.

D) ask for a relatively small amount of capital initially, postponing a full funding request until

the investors better understand the business concept.

Answer: C

Difficulty: 1 Easy

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

244) Bankers and potential investors are likely to read ________ first.

A) the executive summary

B) the marketing plan

C) the qualifications of the management team

D) the analysis of the competition

Answer: A

Difficulty: 1 Easy

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

245) After personal savings, the next largest source of capital for entrepreneurs is from

A) large multinational banks.

B) the Small Business Administration.

C) state and local governments.

D) friends and family.

Answer: D

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.246) ________ are private individuals who invest their own money in potentially hot new

companies before these firms become larger, publicly traded companies.

A) Leveraged buyout specialists

B) Angel investors

C) Venture investors

D) Corporate raider investors

Answer: B

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

247) Due to the credit crunch that developed during the Great Recession, many small businesses

found that ________ were more willing to lend money to smaller operations.

A) large corporations

B) credit card companies

C) international banks

D) smaller, community banks

Answer: D

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

248) A firm or individual providing financial capital to small businesses in exchange for an

ownership stake in the company is called a

A) corporate raider.

B) takeover specialist.

C) financial capitalist.

D) venture capitalist.

Answer: D

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.249) Which of the following government agencies is responsible for encouraging the

development of small business?

A) Small Business Administration

B) Federal Trade Commission

C) Entrepreneur Assistance Center

D) Federal Microloan Authority

Answer: A

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

250) Which of the following sources of investment is the LEAST likely type available to

entrepreneurs?

A) Angel investors

B) Small Business Administration loans

C) Venture capitalists

D) Family and friends

Answer: C

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

251) The Small Business Administration’s microloan program awards loans to entrepreneurs

based primarily on their

A) collateral.

B) credit history.

C) previous business success.

D) integrity and sound business idea.

Answer: D

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.252) A Small Business Investment Company (SBIC) is a(n)

A) agency of the federal government that loans money to high-tech firms.

B) private investment company that is licensed by the SBA to make loans to small businesses.

C) private firm that offers loans to small businesses in return for a share of ownership in the firm.

D) agency set up by state governments to provide managerial advice and support to small

businesses.

Answer: B

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

253) One of the best places for young entrepreneurs to start shopping for an SBA loan is a

A) Small Business Development Center.

B) financial institution specializing in business loans.

C) college or university financial aid office.

D) website for the Venture Capitalists Association.

Answer: A

Difficulty: 1 Easy

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

254) A ________ refers to people with unsatisfied wants and needs who are willing and able to

buy a product or service.

A) market

B) consumer cooperative

C) consumer collective

D) buyer’s cooperative

Answer: A

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.255) To be considered part of a market, an individual must

A) be a registered buyer.

B) have made a purchase within the past 30 days.

C) know the names and addresses of two or more sellers.

D) have both a willingness to buy and the financial resources needed to buy.

Answer: D

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

256) Small business owners often struggle in attracting qualified workers. Which of the

following contributes to this problem?

A) Managers in small firms tend to be disrespectful to the workers.

B) Owners will not often listen to ideas suggested by the workers.

C) Employee relations are especially poor in small firms.

D) Many jobs in small firms have low pay and few benefits.

Answer: D

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

257) Employees of small businesses often have greater job satisfaction than do employees of

larger firms. One reason for this difference in job satisfaction is that employees of small

businesses often

A) earn higher wages.

B) receive more vacation time.

C) get more respect from their bosses.

D) have more job security and better fringe benefits.

Answer: C

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.258) A new business that sets up a(n) ________ from the start is saving itself time and grief

later.

A) angel investment network

B) good accounting system

C) detailed supplier network

D) vertical marketing system

Answer: B

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

259) Small businesses must seek advice from outside experts. In order to put together official

documents such as leases, contracts, and partnership agreements, it is important to seek the

advice of ________.

A) a friend who has already started a business.

B) a competitor in a similar business.

C) an attorney.

D) a marketing expert.

Answer: C

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

260) A(n) ________ is a valuable source of information regarding techniques to reduce a firm’s

exposure to risk.

A) insurance agent

B) accountant

C) liability assessor

D) union business agent

Answer: A

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.261) Similar to how large businesses proceed, small businesses make marketing decisions

________.

A) after the product or service is developed.

B) before the business is funded.

C) at the same time that they hire employees, research for an accountant, and prepare the

business plan.

D) before a product is developed or store is opened.

Answer: D

Difficulty: 1 Easy

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

262) The Small Business Administration sponsors volunteers from industry, trade associations,

and education who offer advice to small business owners. These volunteers are called:

A) the Small Business Council of Volunteers (SBCV).

B) Partners in Service and Economic Progress (PSEP).

C) Small Business Counselors Incorporated (SBCI).

D) the Service Corps of Retired Executives (SCORE).

Answer: D

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

263) Entrepreneurs applying for a bank loan should realize that bankers will

A) expect to receive a share of ownership in the business in exchange for their loan.

B) expect the entrepreneur to provide a business plan.

C) generally make loans only to small businesses in dot-com related industries.

D) offer only short-term financing.

Answer: B

Explanation: A well-prepared business plan is mandatory when seeking financial assistance

from a bank or other investors.

Difficulty: 2 Medium

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.264) A good business plan will

A) focus on the big picture and omit the small details of operating the business.

B) describe all aspects of the business, including product, the target market, the nature of the

competition, any financial resources, and the owner’s qualifications.

C) be purposefully vague, since specifics can restrict creativity and flexibility.

D) focus on the nature of the business and the target market, omitting personal information about

the owner in order to avoid personality issues.

Answer: B

Explanation: A business plan is a detailed written statement that describes the nature of the

business, the target market, the advantages the business will have relative to competitors, and the

resources and qualifications of the owner.

Difficulty: 2 Medium

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

265) The executive summary section of the business plan contains

A) computerized information that readers can access interactively.

B) information that will capture the attention of bankers and other investors who receive many

business plans every day.

C) qualifications, experience, and education of the entrepreneur and prospective employees.

D) a financial summary prepared by the business’s accountant.

Answer: B

Explanation: The executive summary must grab the reader’s attention. In some cases, it is the

only part that some decision makers will read.

Difficulty: 2 Medium

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

written consent of McGraw-Hill Education.266) When seeking financial backing from a venture capitalist, a small business owner should

realize that the venture capitalist will

A) charge an interest rate that is much higher than any other lender.

B) not be interested in the management of the business.

C) expect an ownership stake in the company in exchange for financial backing.

D) demand that the money be repaid within 90 days or less.

Answer: C

Explanation: Venture capitalists often ask for a hefty ownership stake in a business in exchange

for the cash needed to get that business started.

Difficulty: 2 Medium

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

267) A market consists of potential buyers of a good or service. However, for a market to exist

A) the business requires wholesalers and retailers.

B) one firm must dominate in sales and product development.

C) people must have unsatisfied wants and needs as well as a willingness and ability to buy.

D) the product must be laboratory tested and approved by the Food and Drug Administration

(FDA).

Answer: C

Explanation: A market consists of people who have unsatisfied wants and both the willingness

and the resources necessary to buy the good or service.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

100

written consent of McGraw-Hill Education.268) Small business employees

A) usually dislike their jobs and look forward to finding employment with major corporations.

B) find their jobs less challenging than a similar job in a large corporation.

C) usually get paid higher wages than workers in large corporations.

D) often find more job satisfaction than their counterparts in big business.

Answer: D

Explanation: Employees in small businesses are often more satisfied with their jobs than their

counterparts in big business because their jobs are more challenging, their ideas are more

accepted, and their bosses are more respectful.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

269) Entrepreneurs learn that there are many legal and financial issues involved in starting their

business. The best way for the small business owner to resolve these issues and protect the firm’s

resources is

A) for the owner(s) to trust his/her common sense.

B) hire a full-time lawyer and accountant who work exclusively for the small business.

C) defer making decisions regarding these issues until the company is bigger.

D) seek and pay for expert guidance and assistance.

Answer: D

Explanation: Legal and accounting issues are often too complex to trust to instinct and too

important and immediate to defer to a later date. Unfortunately, most small businesses cannot

afford to hire lawyers and accountants as employees. Thus, the best approach is to consult with

professional accountants, lawyers, loan officers, and insurance agents outside the business.

Difficulty: 2 Medium

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

101

written consent of McGraw-Hill Education.270) In order to secure financing for Bitty Bytes, a mobile bakery business that services several

large Silicon Valley firms, Betty demonstrated her unwavering aspiration to get her business

started by visiting several bankers with ________.

A) her insurance agent.

B) her business plan.

C) her venture capitalist.

D) her idea.

Answer: B

Explanation: A business plan provides a detailed written statement of the nature of a firm, its

target market, its competitive advantages, and the resources and qualifications of its owner.

Difficulty: 3 Hard

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

271) In order to improve his chances of small business success, DeMarcus worked hard to

prepare his business plan. Most often, a positive outcome of this exercise is

A) the plan will meet federal reporting requirements of the Internal Revenue Service.

B) the plan ensures financing will be available from the Small Business Administration.

C) the plan enables DeMarcus to think carefully about all aspects of his business idea.

D) the plan will protect DeMarcus from failure.

Answer: C

Explanation: A business plan is a detailed written statement that describes the nature of a

business. Writing a plan forces the entrepreneur to look closely at all areas of the proposed

business.

Difficulty: 3 Hard

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

102

written consent of McGraw-Hill Education.272) For several years, Addison has volunteered to play the piano and sing at a local nursing

home. Now, Addison has decided the time was right to get into the growing eldercare market.

She created Music and Memories, a nonprofit corporation that would hire local talent to perform

her own music productions directed toward this market. In order to write and produce several

productions each year, Addison needed start-up funds. An instructor at the local community

college suggested that she begin by ________, because this effort would help introduce her idea

to interested investors as well as suggest government grant applications that Addison might

pursue.

A) preparing her business plan

B) finding talented performers

C) writing themed performances such as a Thanksgiving concert and a Valentine’s Day concert

D) developing a list of start-up costs

Answer: A

Explanation: The business plan is a comprehensive document that addresses every aspect of the

business. It incorporates a marketing plan and a financial plan, and introduces the management

and operations of the firm to the reader. An executive summary at the beginning of the document

should catch the reader’s attention and interest and position the business by stating its

competitive advantage.

Difficulty: 3 Hard

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

273) As a high net worth individual, Aria searches for developing companies in need of

additional funding to achieve their goals. In return for this ________, she expects to give up

some percentage of ownership in the business.

A) analysis

B) venture capital

C) corporate loan

D) securities investment

Answer: B

Explanation: A venture capitalist is an individual or firm that provides start-up capital in

exchange for a stake in the ownership of the business.

Difficulty: 3 Hard

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

103

written consent of McGraw-Hill Education.274) Skylar is an angel investor. This means that he

A) invests his money in new businesses with potential for growth, hoping for a good return on

his investment if they go public.

B) creates business incubators for start-up web-based firms.

C) invests in nonprofits that plan to change their status when they double in size.

D) comes to the rescue of firms who default on their bank loans.

Answer: A

Explanation: Angel investors are private individuals who invest their own money in potentially

hot new companies before they go public.

Difficulty: 3 Hard

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

275) Sofia recently applied for a microloan from the Small Business Administration. Although

several conditions are important, the SBA’s decision to grant or deny the loan will largely depend

upon

A) her credit history and the collateral she can offer.

B) her age, since microloans are only available to senior citizens.

C) her previous record of business success.

D) the soundness of her business plan, and her integrity.

Answer: D

Explanation: Microloans are awarded on the basis of the borrower’s integrity and the soundness

of their business ideas.

Difficulty: 3 Hard

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

104

written consent of McGraw-Hill Education.276) Francisco came to the U.S. on a swimming scholarship. After a few months of frustration

with trying to find the swim goggles he prefers from home, he created a website that selling

specialty goggles for swimming, skiing, and snowboarding. Before launching the website and

filling orders, Francisco spent a few months going to swim meets and gathering preferences

about goggles from other international swimmers. Francisco’s actions

A) showed that he had a ready market for this product.

B) demonstrated that he had little experience with this product.

C) showed that he was promoting the website before it launched.

D) demonstrated his need to better understand the market.

Answer: D

Explanation: Francisco understands that identifying the market and its needs must occur before

you begin to sell the product. To be part of a market, consumers must have both the willingness

and the resources needed to make a purchase.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

277) Ryan was called by one of his regular customers asking if he had time to repair some

broken sprinkler heads on that customer’s underground sprinkling system. Although it was

already 6:00 p.m. and he already put in a full day of work, he turned his car around and headed

for the customer’s house. As a small business owner, Ryan demonstrates

A) his need for additional cash flow.

B) his ability to easily adapt and respond to his customer’s needs.

C) the fact that it is difficult to find employees willing to go the extra mile for a small business

because benefits are nonexistent.

D) that considering the fact that sprinkler heads are constantly breaking and need repair, his

service is overpriced.

Answer: B

Explanation: Small businesses have the ability to know their customers better and adapt quickly

to their ever-changing needs. Customers will appreciate the prompt service that a small business

can provide.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

105

written consent of McGraw-Hill Education.278) Mohamed’s four employees have been with him since he opened Employment Experts, Inc.,

nearly a decade ago. As he anticipates staffing his new branch office, he decides none of these

four long-time employees are ready to manage the office. Faced with this difficult situation, what

should Mohamed do?

A) He should appoint one of the three anyway to show that he appreciates their loyalty and

commitment.

B) He should run the new branch himself and appoint one of the three to take over the original

office.

C) He should hire a new qualified employee to manage the office since utilizing his unready

employees could be detrimental to the business.

D) He should appoint all three to the new branch and let them run it using a team approach.

Answer: C

Explanation: Appointing unqualified people to management positions can be a serious business

mistake. As difficult as it may be, entrepreneurs best serve themselves and their business if they

gradually recruit and groom employees for management positions.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

279) After Abby graduated from college last year, her uncle created an accounting position for

her in his business. Her older brother is in charge of purchasing inventory for the store, yet often

the store runs out of popular items or is overstocked with products that must be marked down to

be sold. Abby is confident that her brother is more suited for handling accounting and finance,

while she has a sense of what sells and how much sells. Although she has spoken with her uncle

about it a couple of times, he seems reluctant to change. As the founder of the business, he may

A) find it difficult to remove family members from positions, even if it is not good for the

business.

B) find it difficult to retrain Abby for the job, and even though his business is losing

opportunities, he will stay the course.

C) know that profit margins have declined, but he doesn’t care.

D) have a bigger picture of things, and not feel the need to respond to a family member’s request.

Answer: A

Explanation: Attitudes such as “You can’t fire family” or “You must hire them because they’re

family” can frustrate all employees, family and nonfamily. A business is best served if the best

workers are recruited and groomed for management positions.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

106

written consent of McGraw-Hill Education.280) As a small business owner, Jasmine can’t afford to provide her employees with the high

wages and benefits offered by big corporations. One way to keep her employees and create a

high level of motivation would be to

A) constantly communicate with them that “at least they have a job.”

B) adopt a policy of promoting workers who have been employed the longest.

C) empower her employees to develop their own ideas.

D) hire only family members, since they are more loyal.

Answer: C

Explanation: Many small firms motivate workers by creating challenging jobs and treating them

respectfully.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

281) After retiring as a telecommunications executive, Bruce joined SCORE. As a SCORE

counselor Bruce will

A) provide venture capital funds for aspiring small businesspeople.

B) visit high schools to advise students who are thinking about starting their own business.

C) help in the research and development of new products for entrepreneurs to market.

D) provide consulting services to small businesses for free.

Answer: D

Explanation: An important source of information for small businesses is the Service Corps of

Retired Executives (SCORE). This SBA office has volunteers from industry, trade associations,

and education who counsel small businesses at no cost (except for expenses).

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Apply

AACSB: Knowledge Application

Accessibility: Keyboard Navigation

107

written consent of McGraw-Hill Education.282) The size of the world market is about

A) 500 million

B) 7 billion

C) 7 million

D) 10 trillion

Answer: B

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

283) Increased participation in small business exporting owes credit to ________.

A) political constituents who have made inroads abroad.

B) large events such as the Olympics that have brought attention to the potential in world

markets.

C) technological advances such as the Internet and PayPal for safely fulfilling orders.

D) partnerships that small businesses have formed with large businesses.

Answer: C

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

284) One of the hurdles small businesses face when deciding to export is

A) financing is often difficult to find.

B) overseas buyers prefer dealing with large corporations.

C) smaller companies must wait in line after large companies to qualify for tariffs.

D) American products are perceived as inferior.

Answer: A

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

108

written consent of McGraw-Hill Education.285) One reason why many U.S. small businesses are not involved in exporting is

A) there is a limited market for their products.

B) the government’s new homeland security programs limit opportunities for small businesses.

C) many of these firms do not know how to get started.

D) U.S. products are perceived as inferior.

Answer: C

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Remember

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

286) The SBA’s ________ program provides export-financing opportunities for small businesses.

A) Global Trade funding

B) Homeland Security funding

C) Export Express loan

D) International Monetary loan

Answer: C

Difficulty: 1 Easy

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Remember

AACSB: Reflective Thinking

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109

written consent of McGraw-Hill Education.287) Which of the following best describes the outlook for small businesses in international

markets?

A) The world is a larger, and potentially a more lucrative market than the U.S. domestic market.

B) The threat of terrorist activities prevents small businesses from competing internationally.

C) Most foreign buyers prefer to deal with large, well-known corporations rather than small

businesses.

D) Higher business costs eliminate the profit opportunities in global markets.

Answer: A

Explanation: The U.S. has less than 5% of the world’s population, and there is a growing

demand for American goods and services.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

288) Small businesses often have advantages in international markets. Which best describes one

those advantages?

A) They have greater expertise in managing the paperwork required to sell goods in international

markets.

B) They have a better understanding of the cultural differences involved.

C) They can provide individualized customer service as opposed to impersonal corporate

bureaucracies.

D) They have the ability to obtain financing through the International Monetary Fund.

Answer: C

Explanation: Small companies can give more personal service and more undivided attention,

because each overseas account is a major source of business to them.

Difficulty: 2 Medium

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Understand

AACSB: Reflective Thinking

Accessibility: Keyboard Navigation

110

written consent of McGraw-Hill Education.289) Luxe Labels, LLC, exports specialty printing equipment for the custom labeling, flexible

packaging, and carton industry. Thanks to increased support from ________, this company’s

sales to Brazilian companies and other global opportunities have significantly increased.

A) its newly revised website

B) Department of Commerce’s Bureau of Industry and Security

C) the FDA

D) local politicians

Answer: B

Explanation: The Department of Commerce’s Bureau of Industry and Security contains a wealth

of information for small businesses interested in going global.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Apply

AACSB: Knowledge Application

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290) Arturo is a partner in a firm that specializes in producing vitamins and health food products.

While the business is considered small by U.S. standards, he is attempting to persuade his partner

to expand internationally. Arturo would list which of the following as an advantage of going

global?

A) Exporting can help sell excess inventory.

B) Marketing programs benefit from the cultural similarities in prospective markets.

C) Financing can easily be obtained to expand internationally.

D) Selling your products in other markets reduces their life cycle, making them more attractive.

Answer: A

Explanation: Small businesses that make the effort to export have the advantage of selling

excess inventory abroad.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Apply

AACSB: Knowledge Application

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111

written consent of McGraw-Hill Education.291) Antoine is considering marketing his bicycles in Brazil. If he enters the Brazilian market, he

is likely to learn that

A) some cultures like dealing with individuals from smaller companies rather than large

companies.

B) he will not be able to keep up with demand.

C) most foreign cultures prefer large company relationships to small company relationships.

D) there is strong resistance of Brazilian firms with respect to American products.

Answer: A

Explanation: Although some foreign buyers may prefer doing business with major corporations,

many actually enjoy dealing with individuals rather than with big corporate bureaucracies.

Moreover, foreign buyers may appreciate the fact that the smaller firms often provide

personalized service and may be able to begin shipping more quickly. The main problem he will

face is adapting to the cultural differences between the U.S. and Brazil.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

Bloom’s: Apply

AACSB: Knowledge Application

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112

written consent of McGraw-Hill Education.292) Not everyone dreams of owning their own business. Identify and describe at least three

attributes of successful entrepreneurs.

Answer: While students will likely identify managerial skills and leadership abilities, these are

not unique to entrepreneurs. Entrepreneurs also need to be:

• Self-directed. They should be self-disciplined and comfortable with taking responsibility for

success and failure.

• Self-nurturing. Entrepreneurs must be able to believe in their own ideas even when others don’t.

• Action-oriented. Entrepreneurs aren’t just satisfied with a dream; they want to make the dream

a reality.

• Highly energetic. They are willing to work hard to sustain their efforts over long hours.

• Tolerant of uncertainty. Entrepreneurs can accept the risks and uncertainties inherent in running

a business.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Analyze

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written consent of McGraw-Hill Education.293) What is an entrepreneurial team? What benefits does a team offer compared to an

individual entrepreneur?

Answer:

a. Entrepreneurial teams bring experienced people from different areas of business that join

together to form a managerial team with the skills needed to develop, make, and market a new

product. A team may be better than an individual entrepreneur because it provides a combination

of creative skills with production and marketing skills right from the start.

b. Another benefit is the concept of shared planning and decision making. Everyone works

together to conceive, develop, and market products. This results in better coordination and

cooperation among functions.

Difficulty: 3 Hard

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Analyze

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written consent of McGraw-Hill Education.294) List and discuss at least three causes of small business failure.

Answer: (Answers will vary; however, the student should include the information found in

Figure 6.3, “Causes of Small-Business Failure.”)

• Plunging in without first testing the waters on a small scale.

• Underpricing or overpricing goods or services.

• Underestimating how much time it will take to build a market.

• Starting with too little capital.

• Starting with too much capital and being careless in its use.

• Going into business with little or no experience and without first learning something about the

industry or market.

• Borrowing money without planning just how and when to pay it back.

• Attempting to do too much business with too little capital.

• Not allowing for setbacks and unexpected expenses.

• Buying too much on credit.

• Extending credit too freely.

• Expanding credit too rapidly.

• Failing to keep complete, accurate records, so that the owners drift into trouble without

realizing it.

• Carrying habits of personal extravagance into the business.

• Not understanding business cycles.

• Forgetting about taxes, insurance, and other costs of doing business.

• Mistaking the freedom of being in business for oneself for the liberty to work or not, according

to whim.

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written consent of McGraw-Hill Education.Difficulty: 3 Hard

Topic: Define Entrepreneurship

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Analyze

AACSB: Analytic Thinking

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295) Discuss the benefits exporting offers to small businesses. Given these benefits, why don’t

more small firms sell in international markets?

Answer:

a. The world market is potentially a much larger and more lucrative market for businesses than

the United States. Moreover, selling in the world market can absorb excess inventories, soften

downturns in the U.S. market, and extend product lives. It can also add variety and make

managing the business more interesting (and perhaps more challenging).

b. There are many barriers that discourage small businesses from exporting their products. These

barriers include:

• difficulties in arranging financing.

• uncertainties about how to get started in foreign markets.

• ignorance of cultural differences.

• extensive bureaucratic paperwork that can practically bury a small business.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-05 Outline the advantages and disadvantages small businesses have in

entering global markets.

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written consent of McGraw-Hill Education.296) Discuss several ways the Small Business Administration assists entrepreneurs.

Answer:

a. The SBA is a valuable source of information and technical advice for small businesspeople.

b. The SBA also provides financial assistance to small businesses through a variety of programs.

The SBA will sometimes provide direct loans to firms that have difficulty securing conventional

loans from private sources. The SBA also provides programs to help minorities and women

obtain funds.

c. The SBA licenses SBICs, which are private investment companies that loan money to

small businesses.

d. The SBA operates SCORE, the Service Corps of Retired Executives. This group provides

counseling and advice to small business owners.

Difficulty: 3 Hard

Topic: The Importance of Small Business Ownership to the U.S. Economy

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Analyze

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written consent of McGraw-Hill Education.Mini-Case

Pepe Pieman believes that pizza is a much more versatile meal than most people realize. As the

national marketing manager for Pizza Pals, he has watched how consumers ate up barbecue

pizza, Hawaiian pizza, Mexican pizza, and other new and unique combinations. His superiors,

however, met his suggestions for other unusual pizzas with a negative response. Even some of

his teammates laughed at his ideas. Pepe’s confidence in his ability to understand the market has

led him to focus on planning a business of his own. Pepe realizes that he will take a risk when he

leaves his job with Pizza Pals and sets off on a new endeavor: Pepe’s Pizzazzeria. Pepe is excited

about the potential of profitably catering to the unmet desires of pizza consumers.

297) Given Pepe’s willingness to accept the risks of opening and running Pepe’s Pizzazzeria, he

is clearly an example of a(n)

A) arbitrageur.

B) intrapreneur.

C) gambler.

D) entrepreneur.

Answer: D

Explanation: An entrepreneur is someone who accepts the risks of starting and managing a

business.

Difficulty: 3 Hard

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Analyze

AACSB: Analytical Thinking

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written consent of McGraw-Hill Education.298) Pepe remains confident and enthusiastic even though his colleagues have poked fun at his

ideas. This shows that Pepe is

A) self-disciplined.

B) self-nurturing.

C) self-generating.

D) auto-inspirational.

Answer: B

Explanation: People who are self-nurturing are able to believe in their own ideas, even when

others do not, and to refuel the fires of their own enthusiasm.

Difficulty: 3 Hard

Topic: Attributes of Successful Entrepreneurs

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Analyze

AACSB: Analytical Thinking

Accessibility: Keyboard Navigation

299) Pepe is confident that Pepe’s Pizzazzeria will be a success, but only if he has enough money

to do things right. Since Pepe has very little personal wealth, he knows he must find financial

assistance. In order prepare for meetings with bankers and potential investors, Pepe should

A) hire a public relations firm to develop promotional materials.

B) develop a business plan.

C) read a book on entrepreneurship.

D) create a partnership contract.

Answer: B

Explanation: A business plan, which provides a detailed description of the new business, is

mandatory when meeting with bankers and investors.

Difficulty: 3 Hard

Topic: The Business Plan

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Analyze

AACSB: Analytical Thinking

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written consent of McGraw-Hill Education.300) Pepe has asked about the possibility of obtaining a microloan from the SBA. This type of

loan is awarded primarily on the basis of the

A) borrower’s integrity and the soundness of the business idea.

B) amount of collateral the borrower can pledge.

C) borrower’s credit history and record of previous business success.

D) age of the borrower, since only senior citizens qualify.

Answer: A

Explanation: A microloan from the SBA is awarded on the basis of the borrower’s integrity and

the soundness of the borrower’s business idea.

Difficulty: 3 Hard

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Analyze

AACSB: Analytical Thinking

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301) Pepe is positive he knows a lot about marketing. But he is not as confident in his skills

within the legal or financial aspects of starting a new business. He wants to consult with a lawyer

and accountant, but his budget is tight with all of the expenses involved in getting Pepe’s

Pizzazzeria up and running. Pepe should

A) delay talking with a lawyer and accountant until the business has established a positive cash

flow for at least one year.

B) trust his basic instincts and try to put it together without the advice of lawyers and

accountants.

C) consult with a lawyer and accountant even though the budget is tight.

D) immediately hire full-time lawyers and accountants for his staff.

Answer: C

Explanation: Entrepreneurs starting new businesses seldom can afford to have full-time lawyers

and accountants as employees, but it is critical that they obtain professional legal and accounting

advice.

Difficulty: 3 Hard

Topic: Methods of Business Financing

Learning Objective: 06-04 Analyze what it takes to start and run a small business.

Bloom’s: Analyze

AACSB: Analytical Thinking

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written consent of McGraw-Hill Education.302) Since Pepe has worked in marketing for a large corporation before getting into the pizza

business

A) there is no need to consider an entrepreneurial team for start-up due to the fact that all other

management functions are served by marketing.

B) he can skip any marketing research steps that the SBA recommends.

C) he knows that the type of business he wants to start may be difficult to develop, but it has a

tremendous amount of security due to its promise of long-term survival.

D) he plans to put together an entrepreneurial team of experts that will complement his expertise.

Answer: D

Explanation: An entrepreneurial team is a group of experienced professionals from various

business disciplines. Team members bring different skills to the entrepreneurial venture. Their

skills usually complement each other.

Difficulty: 3 Hard

Topic: Define Entrepreneurship

Learning Objective: 06-01 Explain why people take the risks of entrepreneurship; list the

attributes of successful entrepreneurs; and describe entrepreneurial teams, intrapreneurs, and

home- and web-based businesses.

Bloom’s: Analyze

AACSB: Analytical Thinking

Accessibility: Keyboard Navigation

303) As a former classmate of Pepe’s at the nearby university, you remind him what you both

learned in your small business management class several years ago. What would you remind

him?

A) Restaurants are easy to start up, but difficult to keep going.

B) Restaurants are probably the most difficult type of business to start up, due to the labor-

intensive aspects of the business.

C) Experts believe that restaurants have a high profit potential, due the fact that there is not much

direct competition.

D) Restaurants are easy to start up and have great profit potential.

Answer: A

Explanation: The easiest businesses to start (like restaurants) have the greatest potential for

failure. The easiest to keep alive are difficult to get started (like manufacturing).

Difficulty: 3 Hard

Topic: The Advantages and Disadvantages of Small Business Ownership

Learning Objective: 06-02 Discuss the importance of small business to the American economy

and summarize the major causes of small-business failure.

Bloom’s: Analyze

AACSB: Analytical Thinking

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