Deck 7: Small Business and Entrepreneurship: Economic Rocket Fuel

Question 1

When a large company downsizes, some of the middle-aged and older workers who are laid off find it difficult to get another job.When such workers decide to start their own businesses, they are known as _____.

A)welfare recipients.
B)necessity entrepreneurs.
C)post-retirement workers.
D)baby boomers.

Answer 1

B

Question 2

The Global Entrepreneurship Monitor (GEM)shows that people living in high-income countries tend to be much more willing to start their own businesses than people who live in low-income countries.

Answer 2

False

Question 3

Xavi develops a cell phone battery that can be charged by a solar panel and can run efficiently for up to three hours. His friends point out that it would be difficult to get cell phone manufacturers to adopt this new technology and that it could take a long time for people to start relying on it. However, Xavi is convinced that he can make his idea popular and successful. He plans to start a new company called EnerMob Inc.that would promote and sell the cell phone battery to the public.In this scenario, Xavi is said to be demonstrating _____.

A)vision
B)hindsight
C)retrospection
D)reflection

Answer 3

A

Question 4

Dominic feels that an incredible string of bad luck has affected his personal life. He also feels that his boss is subjecting him to unfair treatment at work for no fault of his own. Dominic's perceptions suggest that he has an external locus of control.

Question 5

Three downsides to buying a franchise include high initial costs, the ongoing percent-of-sales royalty fees, and the franchise requirements, which, in effect, reduce the owner's independence.

Question 6

Ted's new company is experiencing a steady decline in profit. He needs external financing to prevent his company's profits from declining further. Considering the fact that he wants to exercise ownership and control over the firm for as long as possible, Ted is likely to find angel investors who are interested in helping him meet his financial needs.

Question 7

Michael is a middle-aged professional who lost his job five months ago when his former employer downsized.He has been actively looking for work since then but has not been able to find a job that truly utilizes his abilities or that offers an income anywhere close to what he earned in his previous position. He is beginning to feel that the only way to survive his current situation is to start his own business. Michael might well become a:

A)venture capitalist.
B)freelance entrepreneur.
C)necessity entrepreneur.
D)frictional worker.

Question 8

Entrepreneurs find new solutions to old problems and develop new products that people didn't even realize they needed.These entrepreneurs are said to have _____.

A)hindsight
B)uncertainty avoidance
C)an external locus of control
D)vision

Question 9

Technological developments over the past two decades, such as the rise of the Internet and email, have:

A)decreased the importance of entrepreneurship in the national economy.
B)given small business owners more flexibility in business management.
C)made it harder for small businesses to compete against large businesses.
D)decreased the independence small businesses have in managing their businesses.

Question 10

David is a high school senior interested in starting his own computer repair business. David's interest in starting his own business will have no effect on the long-term recovery of the economy.

Question 11

The primary reason many people become entrepreneurs is to:

A)avoid difficult challenges.
B)avoid risk uncertainty.
C)make more money.
D)revolutionize business models.

Question 12

Rudy owns a small metal fabrication business that employs 23 workers. As the owner of a small business, one of the major advantages that Rudy will enjoy when competing against larger firms will be a lesser burden of complying with government regulations.

Question 13

Small businesses often have an advantage in foreign markets, where customers want to deal directly with a company's top management.

Question 14

People with an external locus of control:

A)are extremely self-reliant.
B)are more likely to take responsibility for their own failure.
C)feel that they have complete control over their lives.
D)feel buffeted by forces such as random luck.

Question 15

For entrepreneurs, there is usually a correlation between dollars earned and hours worked.

Question 16

The Small Business Administration microloan program lends an average of $13,000 to start-up businesses through community nonprofit organizations.

Question 17

Marion has an innovative idea for better disposal of garbage. Hence, he starts a business to implement this idea that he believes will succeed.He is also aware of the risks involved in starting the business. However, Marion tends to put in only six hours a day into building his business; some days, he finds it difficult to put in any time. Which of the following entrepreneurial characteristics does Marion lack?

A)Energy
B)Confidence
C)Tolerance of uncertainty
D)Vision

Question 18

Damien is a programmer in a software firm. He has recently received a promotion and an annual bonus. He believes that this is a result of random luck as he does not work very hard.Damien has _____.

A)an external locus of control
B)a low tolerance for failure
C)learned optimism
D)entrepreneurial self-reliance

Question 19

Entrepreneurs usually view the world in black and white. They seldom consider the many shades of gray that other people see when they look at the same issues.

Question 20

Who among the following individuals is most likely to become a necessity entrepreneur?

A)Kathy, a well-paid executive assistant who has always been passionate about starting her own bakery
B)Timo, an immigrant engineer who is driven to think about his own venture because his heavy English accent invites discrimination at his office
C)Latoya, a working mother whose busy schedule keeps her from spending quality time with her son and makes her think about starting her own business
D)Andrey, an employee who wants to quit his job immediately because of his dictatorial supervisor and begin his own enterprise where he is the boss

Question 21

Which of the following firms supported by the Small Business Administration (SBA)provides free, comprehensive counseling for small businesses from qualified volunteers?

A)An angel investor
B)The Service Corps of Retired Executives
C)A Small Business Development Center
D)A venture capital firm

Question 22

Which of the following is a drawback of buying a franchise?

A)Half of the franchisees of a brand fail in their first year of operations.
B)If the national brand suffers, so does the franchisee.
C)Getting to know the business model may take time.
D)The buyer has to finance the operation of the franchise.

Question 23

Overhead costs for small businesses:

A)tend to be much higher than they are for large businesses as a percentage of total expenses.
B)are about the same as they are for big companies when measured as a percentage of total expenses.
C)are often lower than they are for big companies, giving small businesses a competitive opportunity.
D)primarily arise because small businesses must hire many consultants and advisers from outside.

Question 24

Which of the following bodies assists entrepreneurs by guaranteeing loans from local commercial lenders?

A)The Federal Reserve
B)The Patent and Trademark Office
C)The Small Business Administration
D)The Department of the Treasury

Question 25

Deborah dreams of owning a pub in the heart of the city she lives in. She wants to have a music band right next to the bar playing her favorite rock ballads. She also has creative ideas for the food on the menu. Since Deborah already has the funds needed to start the pub, which of the following suggestions is most likely to help Deborah realize her dream?

A)Deborah should buy a pub that is already established as that will provide her with better chances of implementing her ideas.
B)Deborah should start from scratch as that will allow her to implement her own concept, decision, and structure.
C)Deborah should buy a franchise of a well-known pub as that will provide her with more opportunities for creativity.
D)Deborah should know that starting a small business will mean very high overhead costs.

Question 26

Ethan is in the process of launching his new business venture that specializes in electronic waste recycling. During this period, he is in constant touch with Lloyd, who has seen success in this niche market. Which of the following entrepreneurial development strategies is Ethan utilizing?

A)Gaining theoretical knowledge
B)Accessing Small Business Administration (SBA) resources
C)Gaining experience
D)Learning from others

Question 27

Which of the following statements is true of necessity entrepreneurship in high-income countries?

A)The rate of necessity entrepreneurship is low.
B)The risks of necessity entrepreneurship are low.
C)Necessity entrepreneurship is a major source of income.
D)Necessity entrepreneurship is nonexistent.

Question 28

Jacob is in urgent need of financing for his rapidly-growing online travel business, Travelmuch. Since Jacob does not usually pay off his loans on time, his credit score is very low. He feels overwhelmed and thinks that it would be ideal if he gets some guidance on how to run the business. Given his situation, which of the following key sources of funding would be ideal for Jacob?

A)A commercial bank loan
B)A venture capital firm
C)An initial public offering
D)A Small Business Administration (SBA) loan

Question 29

Which of the following statements is true of the impact of federal regulations on entrepreneurship?

A)Extensive regulations can impede entrepreneurship.
B)Lack of regulations can stop entrepreneurship from thriving.
C)Entrepreneurs owning small businesses are in favor of strict regulations.
D)Regulations and entrepreneurship are not interdependent.

Question 30

While raising start-up funds from friends and family, it is:

A)acceptable to not repay them.
B)essential to involve them in company dealings.
C)acceptable to not document the financing.
D)essential to keep the relationship as professional as possible.

Question 31

Small business start-ups are likely to find that getting commercial loans is:

A)difficult because commercial lenders are reluctant to give loans to firms that do not have an established record of successful performance.
B)one of the easiest and most flexible ways of obtaining financing because local bankers are usually eager to establish relationships with new companies.
C)relatively difficult because start-ups require much higher financing costs than other sources.
D)the best way to obtain all the financing they need as lenders usually get an ownership stake in the companies.

Question 32

Which of the following is a similarity between venture capital firms and angel investors?

A)Both invest in start-up companies with high growth potential in exchange for a share of ownership.
B)Both charge very high interest rates and structure loans to be repaid in months rather than years.
C)Both require an entrepreneur to provide a minimum of twenty-five to thirty percent of the start-up costs.
D)Both only finance large corporations that operate in universal and generic markets.

Question 33

The nation of Rhodasia has the lowest entrepreneurship rate globally. A new government headed by Prime Minister Arnold Wenger aims to make the country's business environment more supportive toward burgeoning entrepreneurs. Which of the following measures should be taken to increase the entrepreneurship rate in Rhodasia?

A)Increasing unemployment insurance available to employees
B)Eliminating complex regulations placed on businesses
C)Mandating that all businesses must provide employee healthcare
D)Initiating employment protection laws

Question 34

Loren LLC is a small bicycle store that competes effectively with much larger companies since it focuses exclusively on selling bicycles for senior citizens and orthopedic patients. The company has been successful since it has:​

A)exploited a small but profitable market niche.
B)worked to undercut larger competitors.
C)attracted the best talent in the bicycle market.
D)acquired a patent for these bicycles.

Question 35

Which of the following pieces of information is found in the Small Business Administration (SBA)resources?

A)Health tips for entrepreneurs
B)Industry-specific statistics
C)Updates on multibillion-dollar business regulations
D)Tips on making a company public

Question 36

Which of the following is an advantage of starting a business from scratch?

A)One does not have to deal with the prior owner's bad decisions and mistakes.
B)The concept, organizational structure, and operating practices are already in place.
C)Relationships with customers, suppliers, and other stakeholders are established.
D)Getting financing and credit is less challenging as investors are previously known.

Question 37

Which of the following is a powerful contribution made by small businesses to the U.S. economy?

A)Vitalizing rural towns
B)Powering the stock market
C)Vitalizing inner cities
D)Accounting for all private sector output

Question 38

In the context of the U.S. economy, small businesses:

A)do not create a significant percentage of new jobs.
B)contribute to a very small percentage of the gross domestic product.
C)are often the first to contract when times are tough.
D)have an insignificant impact on the state of the economy.

Question 39

Which of the following is an intimidating difficulty that small businesses face?

A)Obstacles in technology
B)High health insurance costs
C)High overhead costs
D)Lack of customer service

Question 40

Deb is offered a job with a start-up venture named Shop Maestro LLC, which is a retail company. Insurance is included in the pay offered to her. Deb declines the offer because the retail market is quite saturateD)Which of the following small business threats was Deb worried about?

A)Shop Maestro offers too little compensation in the form of comprehensive health insurance.
B)Shop Maestro has too little money to finance its day-to-day operations.
C)Shop Maestro is known to be noncompliant with federal and state regulations.
D)Shop Maestro may fail because its industry was not chosen carefully.

Question 41

Local offices affiliated with the Small Business Administration (SBA)that provide comprehensive management assistance to current and prospective small business owners are known as _________.

A)Small Business Development Centers
B)Small Business Incubation Offices
C)Small Business Advancement Stations
D)Small Business Creation Sites

Question 42

Identify the core questions a business plan should address.

Question 43

Peter decides to open a large store that sells organic farm produce, but he is not sure about how to obtain the funding he needs to get started.He calculates the start-up funding that he will need as $50,000. What type of funding would be appropriate for this type of business? What are the advantages and disadvantages of this type of funding?

Question 44

Identify and describe two opportunities and two threats to the success of small businesses.

Question 45

What three factors explain the wide differences in entrepreneurship rates among countries?

Question 46

Describe two basic qualities that define successful entrepreneurs.

Question 47

A _________ is a formal document that describes a business concept and outlines the core business objectives while detailing the strategies and timelines for achieving those objectives.

A)business contract
B)business commission
C)business directory
D)business plan

Question 48

In low-income countries, a high percentage of entrepreneurs are considered _________ entrepreneurs.

A)necessity
B)lifestyle
C)social
D)voluntary

Question 49

When Lucie tells her friends and family about her idea of starting a beauty salon, she does not receive any support and is told that her business would fail. Despite overwhelming negativity, Lucie is certain of her abilities and knowledge on account of her many years of experience in working in a beauty salon. In this case, Lucie displays the entrepreneurial characteristic of _________.

A)uncertainty avoidance
B)energy
C)myopia
D)confidence

Question 50

BrickLane Capital Inc.recently funded Gorge LLC, a rapidly growing chain of restaurants, in exchange for a 49 percent share of ownership. BrickLane Capital is an example of a(n)_________.

A)commercial bank
B)angel investor
C)credit union
D)venture capital firm