15.The daughter of an entrepreneur disliked her father's criticism and eventually decided to quit the family
business and start her own business. The daughter is a _________.
a. corporate opportunist
b. gazelle
c. reluctant entrepreneur
d. refugee
ANS: D
PTS: 1
NAT: Reflective Thinking | Dynamics
REF: p. 15
OBJ: 1-3 TYPE: A
16. Sally, a single mother, opened a florist shop to support her family after losing her job in a corporate
layoff. She is a(n)
a. a woman without a portfolio.
b. a parental refugee.
c. a reluctant entrepreneur.
d. an independent refugee.
A significant number of entrepreneurs are motivated by __________.
a. an easy life
b. financial rewards
c. freedom from long hours
d. job security
ANS: B
PTS: 1
NAT: Analytic | Dynamics
REF: p. 12
OBJ: 1-3 TYPE: C
A woman wants to start a construction company. She should realize that
a. her expectations for the company will probably not differ from her male counterparts.
b. some of the fastest-growing companies in construction are owned by women.
c. it may be impossible for her to break into the "good old boy network".
d. all of the above are true.
ANS: B
PTS: 1
NAT: Reflective Thinking | Dynamics
REF: p. 16
OBJ: 1-4 TYPE: A
31. Amy is contemplating opening her own beauty shop. She should understand that
a. men are starting businesses at a faster rate and therefore many banks may be slow to offer
financing.
b. beauty shops as a service industry typically provide modest returns and she should
plan accordingly.
c. lifestyle businesses such as this one have high prospects for growth if proper planning is
completed before the operation begins.
d. her motivation and expectations will be the same as her male colleagues and therefore she
should expect competition.
33. Overall, what can small firms do to successfully compete against larger companies?
a. Customer focus that is more direct
b. Quality performance equal to large firms
c. concentrating on domestic sales as opposed to global sales
d. Exploit opportunities “cheaper, faster, better”
ANS: D
PTS: 1
NAT: Analytic Value Creation
REF: p. 21
OBJ: 1-5 TYPE: C
An example of a Type B startup idea is
a. a new microsponge technology allowing oils to be contained inside billions of microscopic
sponges.
b. a baby stroller that pushes more easily and is more difficult to overturn than previous
designs.
c. opening a new hamburger stand on the corner with no unique product differentiation.
d. a new mail-order business selling a foreign-produced item never sold domestically before.
ANS: A
PTS: 1
REF: p. 72
NAT: Reflective Thinking | Value Creation
OBJ: 3-1 TYPE: A
11. A Type A idea involves
a. a technically new process.
b. performing an old function in a new and improved way.
c. using prior work experience as a basis for starting a new business.
d. providing customers with a product or service absent in their market but available
elsewhere.
9. Which characteristic is not considered a positive of franchising?
a. higher success rates than for alternative methods.
b. entrepreneurial independence.
c. financial and training assistance.
d. operating benefits.
10.
a.
b.
c.
d.
A disadvantage of franchising is
reduced risk of failure.
access to a proven system.
restricted sales territories.
immediate economies of scale.
11. An entrepreneur would choose a franchise over an independent startup most likely because of the
a. freedom in decision making.
b. guidance provided for organizational structure.
c. probability of success.
d. opportunities to meet and share ideas with other executives.
12. Which item is not an advantage of a family-owned business?
a. shared culture
b. focus on the long-run
c. reduced cost of control
d. commitment
13. Which family characteristic may be in conflict with a business?
a. competition is valued
b. taking advantage of opportunities
c. perpetuate traditions
d. All of the above may be in conflict.
14. In a family business, the interests of the family and the interests of the business are best described as
a. overlapping.
b. conflicting.
c. coinciding.
d. having no relationship with each other.
15. Steve, Harry, and Chris, who own and operate a family auto parts store, are experiencing tough times
during a downturn in the local economy. To help the store survive these conditions, the brothers agree to
each take a 25 percent reduction in salary for a one-year period. This decision
a. demonstrates a weakness of financial management.
b. illustrates an important advantage of a family business.
c. reveals a lack of customer orientation in a family business.
d. reflects a lessening of entrepreneurial ambition in second-generation businesses.
16. A founder's core values may become part of the family business culture because
a. the founder typically knows what is best for the company’s culture.
b. others in the firm absorb traditions and values established by the founder.
c. the values coincide with modern management theory.
d. family members follow family traditions without excessive analysis.
17. Those with a(n) _______ commitment are the most likely to work hard because of their passion for the
business.
a. need-based
b. strategy-based
c. cost-based
d. desire-based
18. Family members who join the business because of a concern that they may not be able to reach career
success on their own display a(n) _____ commitment.
a. desire-based
b. obligation-based
c. need-based
d. cost-based
19. A family member who feels he/she ought to pursue a career in the family business is expressing a(n)
______ commitment.
a. desire-based
b. obligation-based
c. cost-based
d. need-based
20. From the children's standpoint, one common reason that they may be reluctant to join the family firm is a
desire to
a. make a difference in another industry.
b. prove their abilities without family assistance.
c. make a higher rate of pay.
d. help the parent avoid favoritism.
*********************************
1. An entrepreneurial career can provide an exciting life and substantial personal rewards while also
contributing to the welfare of society.
ANS: T
PTS: 1
NAT: Analytic | Economic Environment
REF: p. 5
OBJ: 1-1 TYPE: C
5. According to the text, the term entrepreneur is refers to small business founders only.
ANS: F
According to the text, entrepreneur refers to founders, franchisees, second-generation members of familyowned firms, and owner-managers who buy out the founders of existing firms.
PTS: 1
REF: p. 5
NAT: Analytic | Dynamics
OBJ: 1-1 TYPE: D
7. An owner-manager is a person who founds a new business.
ANS: F
An owner-manager may be an individual who bought out the founder(s) of an existing firm (or later
owners) and thus is not necessarily the one who started the firm.
PTS: 1
REF: p. 4
NAT: Analytic | Dynamics
OBJ: 1-4 TYPE: D
8. According to the text, owner-managers who buy out founders of existing firms may be classified as
entrepreneurs.
ANS: T
PTS: 1
NAT: Analytic | Dynamics
REF: p. 5
OBJ: 1-1 TYPE: D
9. The universally accepted definition of the term small business is based on the number of people employed
by the firm.
ANS: F
There have been a number of attempts to define the term small business, using such criteria as the number
of employees, sales volume, and value of assets, but there is no universally accepted definition.
PTS: 1
REF: p. 6
NAT: Analytic | Dynamics
OBJ: 1-1 TYPE: D
10. A primary reason for becoming an entrepreneur is to create a product or service that makes the world a
better place.
ANS: T
PTS: 1
NAT: Global Dynamics | Value Creation
REF: p. 12
OBJ: 1-3 TYPE: C
Many new businesses are formed from an entrepreneur seeing ways to improve or modify a product as a result of
previous work experience.
ANS: T
PTS: 1
NAT: Analytic | Value Creation
REF: p. 72
OBJ: 3-1 TYPE: C
3. Based on knowledge gleaned from a present or recent job, entrepreneurs may see new startup ideas from
modifying an existing product, improving a service, or duplicating a business concept in a different
location.
ANS: T
PTS: 1
NAT: Analytic | Value Creation
REF: p. 73
OBJ: 3-1 TYPE: C
4. Hobbies or personal interests can provide startup ideas.
ANS: T
PTS: 1
NAT: Analytic | Value Creation
REF: p. 74
OBJ: 3-1 TYPE: C
5. Serendipity describes a new product idea resulting from deliberate search activities.
ANS: F
Serendipity refers to making desirable accidental discoveries, not engaging in deliberate search efforts.
PTS: 1
REF: p. 74
NAT: Analytic | Value Creation
OBJ: 3-1 TYPE: D
16. The industry environment is defined as the combined forces that directly impact a given firm and its
competitors.
ANS: T
PTS: 1
REF: p. 81
NAT: Analytic | Economic Environments
OBJ: 3-4 TYPE: D
One of the advantages of buying a franchise is that the purchaser has access to a proven business system.
ANS: T
PTS: 1
NAT: Analytic | Value Creation
REF: p. 109
OBJ: 4-2 TYPE: C
2. A franchise is typically attractive because it offers training, financial assistance, and operating benefits.
ANS: T
PTS: 1
NAT: Analytic | Value Creation
REF: p. 110
OBJ: 4-2 TYPE: C
3. A disadvantage of purchasing a franchise is that franchisors seldom provide adequate training programs.
ANS: F
Results show that most franchisors provide training.
PTS: 1
REF: p. 110
NAT: Analytic | Value Creation
OBJ: 4-2 TYPE: C
4. The unscrupulous actions by franchisors to void contracts of franchisees in order to sell the franchise to
someone else and collect an additional fee is called chewing.
ANS: F
The term is churning.
PTS: 1
REF: p. 112
NAT: Analytic | Ethical and Legal
OBJ: 4-2 TYPE: D
5. A comprehensive listing of franchisors can be found on the website of the International Franchise
Association.
ANS: T
PTS: 1
NAT: Analytic | Dynamics
REF: p. 116
OBJ: 4-3 TYPE: C