Small Business Revision
Chapter 01 Small Business: Its Opportunities and Rewards
True / False Questions
1.
(p. 5)
The U.S. government agency that helps people start small businesses is the U.S.
Department of Commerce.
FALSE
Small Business Administration (SBA) is a part of the U.S. government, which provides
support and advocacy for small businesses.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-01 Describe the scope of small business in the United States.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
2.
Entrepreneurs are exclusively found in farming-related occupations.
(p. 5)
FALSE
Entrepreneurs could be found in just about every type of work there is, literally in
hundreds of occupations.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-01 Describe the scope of small business in the United States.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
3.
(p. 6)
Small-scale entrepreneurs are only allowed to trade in sale of goods and not in trades
of service.
FALSE
As an entrepreneur, you may be the owner of the business, but your occupation will
depend on what type of goods or services you and your firm are producing.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-01 Describe the scope of small business in the United States.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
4.
(p. 6)
Truly entrepreneurial businesses are characterized by imitativeness in their products,
services, or business models.
FALSE
Truly entrepreneurial businesses are characterized by novelty, in their products,
services, or business models.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-01 Describe the scope of small business in the United States.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
5.
Self-employed persons are not referred to as entrepreneurs.
(p. 7)
FALSE
The self-employed, anyone who works for himself or herself instead of for others, is
also an entrepreneur. According to the Census Bureau, there were about 14.7 million
self-employed people in 2010.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-01 Describe the scope of small business in the United States.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
6.
(p. 8)
Small businesses focus on effectiveness, whereas high-growth ventures focus on
efficiency.
FALSE
Small businesses focus on efficiency, whereas high-growth ventures focus on
effectiveness.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-02 Learn the differences between small businesses and high-growth ventures.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
7.
(p. 8)
Small businesses start small but are intended to grow rapidly, often requiring a team of
partners.
FALSE
High-growth ventures start small but are intended to grow rapidly, often requiring a
team of partners or managers to handle the growth.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-02 Learn the differences between small businesses and high-growth ventures.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
8.
(p. 8)
Lifestyle or part-time firms typically provide enough profit or salary to supplement an
income but usually not enough on which to live.
TRUE
Lifestyle or part-time firms typically have sales of $25,000 a year or less, which
provides enough profit or salary to supplement an income but usually not enough on
which to live.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs and Firm Growth Strategies
9.
Traditional small businesses' schedules are defined by the owners' needs.
(p. 9)
FALSE
Traditional small businesses are the smallest full-time businesses, with schedules
defined by customer, not owner, needs.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs and Firm Growth Strategies
10.
High-growth ventures are also known as main street businesses.
(p. 9)
FALSE
Main street businesses include the lifestyle firms, the traditional small businesses, and
the high-performing small businesses.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs and Firm Growth Strategies
11.
(p. 10)
Flexibility rewards refer to the money made from owning a business.
FALSE
Income rewards refer to the money made from owning your own business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-04 Explore the rewards entrepreneurs can achieve through their businesses.
Level of Difficulty: 1 Easy
Topic: Rewards for Starting a Small Business
12.
Flexibility rewards are the most rapidly growing type of reward.
(p. 10)
TRUE
Flexibility rewards are perhaps the most rapidly growing type of reward. They refer to
the ability of business owners to structure their lives in the way that best suits their
needs.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-04 Explore the rewards entrepreneurs can achieve through their businesses.
Level of Difficulty: 1 Easy
Topic: Rewards for Starting a Small Business
13.
(p. 12)
Using low-cost or free techniques to minimize cost of doing business is referred to as
bootstrapping.
TRUE
Bootstrapping is using low-cost or free techniques to minimize cost of doing business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-05 Be able to dispel the key myths about small businesses.
Level of Difficulty: 1 Easy
Topic: Myths about Small Businesses
14.
Ninety percent of all new businesses fail within two years.
(p. 12)
FALSE
This is a myth about small-scale businesses. This statement is wrong in two major
ways. First, the percentage is wrong. Studies show that 69 percent of businesses are
still going after two years, 51 percent are still going at 5 years, 34 percent make it past
10 years and 25 percent survive 15 years. Second, looking at the businesses that
close, the vast majority close but don't fail.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-05 Be able to dispel the key myths about small businesses.
Level of Difficulty: 1 Easy
Topic: Myths about Small Businesses
15.
The most frequently occurring element of the BRIE model is intention.
(p. 13)
TRUE
Intention is the desire to start a business and is the most frequently occurring element
of the BRIE model.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-06 Identify actions key to becoming a small business.
Level of Difficulty: 1 Easy
Topic: Getting Started Now: Entry Competencies
16.
(p. 13)
In the BRIE model, exchange refers to moving resources, goods, or services to others,
in exchange for money or other resources.
TRUE
Exchange refers to moving resources, goods, or service to others, in exchange for
money or other resources.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-06 Identify actions key to becoming a small business.
Level of Difficulty: 1 Easy
Topic: Getting Started Now: Entry Competencies
17.
(p. 13)
The disadvantage of the BRIE model is that it does not mention the management of
resources.
FALSE
In order to start a business, you need four elements to come together—boundary,
resources, intention, and exchange. This is referred to as the BRIE model.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-06 Identify actions key to becoming a small business.
Level of Difficulty: 1 Easy
Topic: Getting Started Now: Entry Competencies
18.
One of the key elements of the BRIE model is a person's intentions to start a business.
(p. 13)
TRUE
Intention is the desire to start a business and is the most frequently occurring element
of the BRIE model.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-06 Identify actions key to becoming a small business.
Level of Difficulty: 1 Easy
Topic: Getting Started Now: Entry Competencies
19.
(p. 17)
High-growth ventures and big businesses generally do not succeed without small
businesses offering supporting services.
TRUE
Without small businesses offering supporting services or offering to subcontract at low
cost to the high-growth ventures and big businesses or creating the kinds of
communities where creative and entrepreneurial people like to live, the big businesses
will not succeed.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 2 Medium
Topic: Small Business and the Economy
20.
Entrepreneurship levels are very high in efficiency-driven economies.
(p. 18)
FALSE
Entrepreneurship levels in efficiency-driven economies are in the middle range.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
21.
(p. 20)
The primary focus of corporate entrepreneurship is creating new civic organizations
which are financially self-sufficient.
FALSE
Social entrepreneurship involves creating new charitable and civic organizations which
are financially self-sufficient.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
Multiple Choice Questions
22.
(p. 5)
The _____ is a U.S. government agency that helps people start a business and also
provides them support and advocacy.
A. Small Business Administration
B. U.S. Department of Business Development
C. U.S. Department of Commerce
D. U.S. Entrepreneurial Administration
Small Business Administration (SBA) is a part of the U.S. government, which provides
support and advocacy for small businesses.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-01 Describe the scope of small business in the United States.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
23.
Truly entrepreneurial businesses are characterized by:
(p. 6)
A. the franchise they are associated with.
B. the degree to which their products are imitative.
C. the novelty in their products, services, or business models.
D. the ease with which their product is accepted by the buyers.
Truly entrepreneurial businesses are characterized by novelty, in their products,
services, or business models.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-01 Describe the scope of small business in the United States.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
24.
Small businesses are usually:
(p. 6)
A. imitative in nature.
B. characterized by the novelty of their products.
C. the same as high-growth ventures.
D. not affected by market fluctuations.
Small businesses are imitative in nature, with most small firms doing what other firms
do, with only slight variations.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-01 Describe the scope of small business in the United States.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
25.
Which of the following is true of a franchise?
(p. 7)
A. It is the international term for all small businesses.
B. It is a type of novelty organization.
C. It is an organization that provides loans to start small businesses.
D. It is a prepackaged business bought, rented, or leased from a company.
Franchise is a prepackaged business bought, rented, or leased from a company called
a franchisor.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-01 Describe the scope of small business in the United States.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
26.
(p. 7)
A person who becomes an owner by inheriting or getting a stake in a family business is
known as a _____.
A. founder
B. franchisor
C. heir
D. serial entrepreneur
Heirs are those who inherit or are given a stake in the family business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-01 Describe the scope of small business in the United States.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
27.
(p. 7)
A business owned by an individual or a little group is referred to as a(n):
A. corporate chain.
B. conglomerate.
C. concern.
D. independent small business.
Independent small business is a business owned by an individual or small group.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-01 Describe the scope of small business in the United States.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
28.
A business run by the individual who owns it is referred to as a(n) _____.
(p. 7)
A. franchise
B. owner-managed firm
C. professionally-owned business
D. novelty firm
A business run by the individual who owns it is referred to as an owner-managed firm.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-01 Describe the scope of small business in the United States.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
29.
Which of the following is true of a small business?
(p. 8)
A. Its preferred funding source is other people's money.
B. It sells more when it is facing bankruptcy.
C. It considers sales as more important than marketing.
D. It focuses more on effectiveness than on efficiency.
For a small business, sales are more important than marketing.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-02 Learn the differences between small businesses and high-growth ventures.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
30.
(p. 8)
Small businesses differ from high-growth ventures in that in small businesses:
A. the focus is on effectiveness rather than efficiency.
B. the preferred source of funding is the owner's own money rather than other people's
money.
C. the delegation of responsibilities is easy and necessary rather than difficult.
D. the metastrategy is for novelty rather than imitation.
In small businesses, the preferred source of funding is the owner's own money rather
than other people's money.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-02 Learn the differences between small businesses and high-growth ventures.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
31.
High-growth ventures differ from small businesses in that in high-growth ventures:
(p. 8)
A. the focus is on efficiency rather than effectiveness.
B. the preferred source of funding is the owner's own money rather than other people's
money.
C. the human resource system is personalized rather than professionalized.
D. the limitation of growth is dictated by market response rather than the owner's loss
of control.
In high-growth ventures, the limitation of growth is dictated by market response rather
than the owner's loss of control.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-02 Learn the differences between small businesses and high-growth ventures.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
32.
Which of the following is a characteristic of a small business?
(p. 8)
A. Source of funding is primarily other people's money
B. Focus is on efficiency
C. Professionalized approach to human resource
D. Delegation is essential
Small businesses focus more on efficiency than effectiveness.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-02 Learn the differences between small businesses and high-growth ventures.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
33.
Which of the following is true of a high-growth venture?
(p. 8)
A. It considers sales as more important than marketing.
B. Its metastrategy is novelty.
C. It focuses more on efficiency than on effectiveness.
D. It does not allow for easy delegation of work or responsibilities.
The metastrategy of a high-growth venture is novelty, whereas that of a small business
is imitation.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-02 Learn the differences between small businesses and high-growth ventures.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
34.
Which of the following is an attribute of a high-growth venture?
(p. 8)
A. Its preferred funding source is the owner's own money.
B. Its metastrategy is imitation.
C. It grows when necessary.
D. It considers delegation essential.
Delegation is essential for high-growth ventures.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-02 Learn the differences between small businesses and high-growth ventures.
Level of Difficulty: 2 Medium
Topic: Entrepreneurs Are Everywhere
35.
(p. 8)
Which of the following is a difference between a small business and a high-growth
venture?
A. For a small business, the preferred funding source is other people's money,
whereas for a high-growth venture, it is the owner's own money.
B. For a small business, the personal control preference is to involve others, whereas
a high-growth venture prefers to retain autonomy.
C. A small business focuses on effectiveness, whereas a high-growth venture focuses
on efficiency.
D. A small business grows when necessary, whereas a high-growth venture grows
when possible.
A small business grows when necessary, whereas a high-growth venture grows when
possible.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-02 Learn the differences between small businesses and high-growth ventures.
Level of Difficulty: 2 Medium
Topic: Entrepreneurs Are Everywhere
36.
High-growth ventures:
(p. 8)
A. use imitation as their metastrategy.
B. start small but are intended to grow rapidly.
C. cannot include a team of partners.
D. do not delegate tasks.
High-growth ventures start small but are intended to grow rapidly, often requiring a
team of partners or managers to handle the growth.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-02 Learn the differences between small businesses and high-growth ventures.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs Are Everywhere
37.
Which of the following describes the significance of an overall growth strategy?
(p. 8)
A. It represents a driver of the variety of entrepreneurship.
B. It allows for one small business enterprise to incorporate in multiple states at the
same time.
C. It provides the owner a stake in the family business.
D. It helps buyers to get familiar with new products.
Overall growth strategy represents a driver of the variety of entrepreneurship. The
overall growth strategy describes the kind of business the owner (or owners) would like
to have, from the perspective of how fast and to what level they would like the firm to
grow.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 2 Medium
Topic: Entrepreneurs and Firm Growth Strategies
38.
(p. 8)
Which of the following is a characteristic of a lifestyle firm?
A. It starts small and grows very rapidly to become a big business.
B. It represents about 20 percent of all businesses.
C. It typically has sales of $25,000 a year or less.
D. It aims to achieve growth rates of 25 percent or more a year.
Lifestyle or part-time firms typically have sales of $25,000 a year or less, which
provides enough profit or salary to supplement an income but usually not enough on
which to live.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 2 Medium
Topic: Entrepreneurs and Firm Growth Strategies
39.
Which of the following is true of a part-time firm?
(p. 8)
A. It starts small and stays very small.
B. It has a continuous growth.
C. Its success is defined by annual profits of $1,000,000.
D. It aims to achieve growth rates of 25 percent or more a year.
Lifestyle or part-time businesses start and stay very small, often operating seasonally
or when the owner wants to work in the business.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 2 Medium
Topic: Entrepreneurs and Firm Growth Strategies
40.
In lifestyle firms:
(p. 8)
A. success is defined by sales of between $100,000 and $1,000,000.
B. schedules are defined by customer needs.
C. the income generated usually provides a living for the owner and family.
D. growth tends to quickly level off.
Growth in lifestyle or part-time firms tends to quickly level off after the owners operate
long enough to learn the basics of making money in their industry and setting.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 2 Medium
Topic: Entrepreneurs and Firm Growth Strategies
41.
Which of the following categories does the majority of small businesses fall under?
(p. 9)
A. High-growth ventures
B. High-performing small businesses
C. Lifetime/Part-time firms
D. Traditional small business
About 53-percent of all small businesses fall into the category of lifetime/part-time
firms.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs and Firm Growth Strategies
42.
_____ are the smallest full-time business.
(p. 9)
A. High-performing small businesses
B. Traditional small businesses
C. High-growth ventures
D. Lifestyle businesses
Traditional small businesses are the smallest full-time businesses, with schedules
defined by customer, not owner, needs.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs and Firm Growth Strategies
43.
Which of the following is true of a traditional small business?
(p. 9)
A. It is usually a multi-site business.
B. It generally has sales between $100,000 and $1,000,000 depending on the
industry.
C. It defines its schedules based on customer needs.
D. It follows a continuous growth curve.
Traditional small businesses are the smallest full-time businesses, with schedules
defined by customer, not owner, needs.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 2 Medium
Topic: Entrepreneurs and Firm Growth Strategies
44.
Which of the following is a characteristic of a traditional small business?
(p. 9)
A. It is often a one-site business.
B. It follows a continuous growth curve.
C. It defines its schedules based on the owner's needs.
D. It generally has sales between $100,000 and $1,000,000 depending on the
industry.
Most often, traditional small businesses are one-site businesses with sales of between
$25,000 and $100,000.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 2 Medium
Topic: Entrepreneurs and Firm Growth Strategies
45.
A traditional small business generally has sales of between:
(p. 9)
A. $100,000 and $1,000,000.
B. $100,000 and $200,000.
C. $25,000 and $100,000.
D. $50,000 and $80,000.
Most often, traditional small businesses are one-site businesses with sales of between
$25,000 and $100,000.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs and Firm Growth Strategies
46.
Which of the following is true of the growth of a typical traditional small business?
(p. 9)
A. It tends to quickly level off after the owners operate long enough to learn the basics
of making money.
B. It levels off after operations settle into a consistent, money-making pattern
generating income to provide a living for the owner.
C. It grows at rates between 5 to 15 percent a year.
D. It grows at rates of 25 percent or more a year.
In traditional small businesses, growth levels off after operations settle into a
consistent, money-making pattern, generating enough income to provide a living for the
owner and family.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 2 Medium
Topic: Entrepreneurs and Firm Growth Strategies
47.
(p. 9)
_____ tend to level off after success defined by sales of between $100,000 and
$1,000,000, depending on the industry.
A. Lifestyle firms
B. Traditional small businesses
C. High-performing small businesses
D. High-growth ventures
High-performing small businesses tend to level off after success defined by sales of
between $100,000 and $1,000,000, depending on the industry.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs and Firm Growth Strategies
48.
Which of the following is true of a high-performing small business?
(p. 9)
A. It often grows through multiple locations.
B. It aims to achieve growth rates of 25 percent or more a year.
C. It has sales of more than $1 million.
D. It has low levels of professionalization.
High-performing small businesses grow at rates more like 5 to 15 percent a year,
adding employees, and often growing through multiple locations and higher levels of
professionalization.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 2 Medium
Topic: Entrepreneurs and Firm Growth Strategies
49.
Which of the following is a characteristic of a high-growth venture?
(p. 9)
A. It pursues low levels of professionalization.
B. It levels off after operations settle into a consistent, money-making pattern.
C. It aims to achieve growth rates of 25 percent or more a year.
D. Its success is defined by sales of between $100,000 and $1,000,000 annually.
High-growth ventures aim to achieve growth rates of 25 percent or more a year, with
sales of more than $1 million.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 2 Medium
Topic: Entrepreneurs and Firm Growth Strategies
50.
(p. 9)
Lifestyle firms, traditional small businesses, and high-performing small businesses are
often called _____.
A. main street businesses
B. Wall Street businesses
C. high-growth ventures
D. universal businesses
95 percent of businesses outside of the high-growth sector are what are often called
main street businesses and include the lifestyle firms, the traditional small businesses,
and the high-performing small businesses.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-03 Understand the four types of firm level growth.
Level of Difficulty: 1 Easy
Topic: Entrepreneurs and Firm Growth Strategies
51.
Which of the following is a reward universally mentioned by entrepreneurs?
(p. 10)
A. Peer admiration
B. Personal growth
C. Political power
D. Industry recognition
Nearly all entrepreneurs talk about three key rewards—flexibility, a livable income, and
personal growth.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-04 Explore the rewards entrepreneurs can achieve through their businesses.
Level of Difficulty: 1 Easy
Topic: Rewards for Starting a Small Business
52.
_____ is a reward universally mentioned by entrepreneurs.
(p. 10)
A. Industry recognition
B. Peer admiration
C. Political power
D. Work flexibility
Nearly all entrepreneurs talk about three key rewards—flexibility, a livable income, and
personal growth.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-04 Explore the rewards entrepreneurs can achieve through their businesses.
Level of Difficulty: 1 Easy
Topic: Rewards for Starting a Small Business
53.
Which of the following is a reward that is rarely mentioned by entrepreneurs?
(p. 10)
A. To have a chance to build great wealth
B. To have greater flexibility for personal and family life
C. To continue a family tradition
D. To develop an idea for a product
There are rewards that entrepreneurs mention less often than working people in
general. These are social rewards, like the respect or admiration of others, or power
over others, and family rewards, like continuing a family tradition in business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-04 Explore the rewards entrepreneurs can achieve through their businesses.
Level of Difficulty: 1 Easy
Topic: Rewards for Starting a Small Business
54.
(p. 10)
_____ rewards are those which people get from facing and beating or learning from
challenges.
A. Recognition
B. Flexibility
C. Income
D. Growth
The three most popular types of rewards for small business owners are growth,
flexibility, and income. Growth rewards are what people get from facing and beating or
learning from challenges.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-04 Explore the rewards entrepreneurs can achieve through their businesses.
Level of Difficulty: 1 Easy
Topic: Rewards for Starting a Small Business
55.
Which of the following rewards refer to the money made from owning a business?
(p. 10)
A. Growth rewards
B. Flexibility rewards
C. Income rewards
D. Performance rewards
Income rewards refer to the money made from owning a business. For more than
three-quarters of entrepreneurs, this means seeking to match or slightly better the
income they had before they started their own business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-04 Explore the rewards entrepreneurs can achieve through their businesses.
Level of Difficulty: 1 Easy
Topic: Rewards for Starting a Small Business
56.
(p. 10)
Tina runs her consultancy business from her home. Working from home allows her to
set her own schedule and take time off at her convenience so that she can be with her
family. The fact that Tina gets more time with her family can be categorized as ______
reward.
A. income
B. flexibility
C. growth
D. credit
Flexibility rewards refer to the ability of business owners to structure their lives in the
way that best suits their needs.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 01-04 Explore the rewards entrepreneurs can achieve through their businesses.
Level of Difficulty: 2 Medium
Topic: Rewards for Starting a Small Business
57.
(p. 10)
The ability of business owners to structure their lives in the way that best suits their
needs refers to:
A. flexibility rewards.
B. family rewards.
C. growth rewards.
D. wealth rewards.
Flexibility rewards are perhaps the most rapidly growing type of reward. They refer to
the ability of business owners to structure their lives in the way that best suits their
needs.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-04 Explore the rewards entrepreneurs can achieve through their businesses.
Level of Difficulty: 1 Easy
Topic: Rewards for Starting a Small Business
58.
Which of the following is a myth about small businesses?
(p. 11)
A. That failed entrepreneurs can succeed if they try again
B. That a small business will never have enough financing
C. That students have skills to start small businesses
D. That small businesses can start during recession
It is a myth that small businesses do not have enough financing.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-05 Be able to dispel the key myths about small businesses.
Level of Difficulty: 1 Easy
Topic: Myths about Small Businesses
59.
(p. 12)
Financing a business online through the collective involvement of others who provide
donations, loans, or investments is referred to as _____.
A. crowdfunding
B. bootstrapping
C. microfinancing
D. crowdsourcing
Financing a business online through the collective involvement of others who provide
donations, loans, or investments is referred to as crowdfunding.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-05 Be able to dispel the key myths about small businesses.
Level of Difficulty: 1 Easy
Topic: Myths about Small Businesses
60.
Bootstrapping refers to:
(p. 12)
A. funding a business online through the collective involvement of others who provide
loans.
B. buying, renting, or leasing a prepackaged business from another company.
C. inheriting or being given a stake in a family business.
D. using low-cost or free techniques to minimize the cost of doing business.
Bootstrapping refers to using low-cost or free techniques to minimize the cost of doing
business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-05 Be able to dispel the key myths about small businesses.
Level of Difficulty: 1 Easy
Topic: Myths about Small Businesses
61.
(p. 12)
Anna helps brides-to-be choose wedding gowns that best suit their requirements and
budget, and also helps them with where they can find the right dress. She has made
her home her virtual office; she does not require external financing. Anna is using
_____ to run her small business.
A. crowdfunding
B. franchising
C. bootstrapping
D. crowdsourcing
Bootstrapping refers to using low-cost or free techniques to minimize the cost of doing
business.
AACSB: Analytic
Blooms: Apply
Learning Objective: 01-05 Be able to dispel the key myths about small businesses.
Level of Difficulty: 3 Hard
Topic: Myths about Small Businesses
62.
(p. 13)
According to the BRIE model, which of the following is an element that is necessary to
start a business?
A. Boundary
B. Recognition
C. Efficiency
D. Income
In order to start a business, four elements must come together—boundary, resources,
intention, and exchange.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-06 Identify actions key to becoming a small business.
Level of Difficulty: 1 Easy
Topic: Getting Started Now: Entry Competencies
63.
According to the BRIE model, _____ sets up a business as a firm.
(p. 13)
A. intention
B. exchange
C. franchise
D. boundary
A business needs the benefits of a boundary—something that sets it up as a firm, and
sets it off from the buying or selling or bartering we all do occasionally.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-06 Identify actions key to becoming a small business.
Level of Difficulty: 1 Easy
Topic: Getting Started Now: Entry Competencies
64.
(p. 13)
According to the BRIE model, which of the following sets a firm off from the buying or
selling or bartering done casually by nonmerchants?
A. Resources
B. Boundary
C. Intention
D. Exchange
A business needs the benefits of a boundary—something that sets it up as a firm, and
sets it off from the buying or selling or bartering.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-06 Identify actions key to becoming a small business.
Level of Difficulty: 1 Easy
Topic: Getting Started Now: Entry Competencies
65.
(p. 13)
According to the BRIE model, which of the following falls under the boundary
category?
A. The financial resources of a company
B. The desire to start a business
C. An e-mail address of the company
D. A product or service offered by the company
A boundary can be something as simple as a business name or government
registration, a phone or e-mail address dedicated to the business, or a specific location
for the firm in a home, commercial space, or even on the Internet.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-06 Identify actions key to becoming a small business.
Level of Difficulty: 1 Easy
Topic: Getting Started Now: Entry Competencies
66.
(p. 13)
John owns a small business that does computer servicing. Which of the following
would represent boundary as mentioned in the BRIE model in John's computer
servicing business?
A. The employees that work under John
B. The office in which John works
C. The money earned by John from the business
D. The desire to expand the business to writing software
A boundary can be something as simple as a business name or government
registration, a phone or e-mail address dedicated to the business, or a specific location
for the firm in a home, commercial space, or even on the Internet. Here's John's office
is a location for the firm and hence is an example of boundary as explained in the BRIE
model.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 01-06 Identify actions key to becoming a small business.
Level of Difficulty: 2 Medium
Topic: Getting Started Now: Entry Competencies
67.
(p. 13)
In the BRIE model, a business name or government registration, a phone or e-mail
address dedicated to the business, or a specific location for the firm in a home,
commercial space, or on the Internet represents:
A. exchange.
B. resource.
C. boundary.
D. intention.
A boundary can be something as simple as a business name or government
registration, a phone or e-mail address dedicated to the business, or a specific location
for the firm in a home, commercial space, or even on the Internet.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-06 Identify actions key to becoming a small business.
Level of Difficulty: 1 Easy
Topic: Getting Started Now: Entry Competencies
68.
According to the BRIE model, which of the following is true of a resource?
(p. 13)
A. It includes a business name or government registration.
B. It refers to moving goods or services to others for money.
C. It is the most frequently occurring element of the BRIE model.
D. It includes the product or service to be offered.
Resources include the product or service to be offered, informational resources on
markets and running a business, financial resources, and human resources such as
your own time to devote to the business, or that of others working with you or for you.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-06 Identify actions key to becoming a small business.
Level of Difficulty: 1 Easy
Topic: Getting Started Now: Entry Competencies
69.
Which of the following is the most frequently occurring element of the BRIE model?
(p. 13)
A. Intention
B. Boundary
C. Exchange
D. Resources
Intention is the desire to start a business and is the most frequently occurring element
of the BRIE model.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-06 Identify actions key to becoming a small business.
Level of Difficulty: 1 Easy
Topic: Getting Started Now: Entry Competencies
70.
(p. 13)
Which of the following elements of the BRIE model represents the desire to start a
business?
A. Intention
B. Boundary
C. Exchange
D. Resources
Intention is the desire to start a business and is the most frequently occurring element
of the BRIE model.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-06 Identify actions key to becoming a small business.
Level of Difficulty: 1 Easy
Topic: Getting Started Now: Entry Competencies
71.
In terms of new jobs, which of the following is true of a small business?
(p. 15)
A. It does not employ people looking for part-time work.
B. It is of no importance to existing jobs.
C. It offers jobs to people with atypical work histories.
D. It pays taxes on behalf of the people it hires.
One reason small businesses are a key employer is because they are more willing
than most large businesses to offer jobs to people with atypical work histories or
needs, like people new to the workforce, people with uneven employment histories,
and people looking for part-time work.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 2 Medium
Topic: Small Business and the Economy
72.
(p. 15)
The way that newly created goods, services, or firms hurt existing goods, services, or
firms is referred to as:
A. benchmarking.
B. creative destruction.
C. service distortion.
D. crowdsourcing.
Small business is a key element of every nation's economy because it offers a very
special environment in which the new can come into being. Austrian economist Joseph
Schumpeter labeled this process creative destruction. It refers to the way that newly
created goods, services, or firms can hurt existing goods, services, or firms.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
73.
(p. 15)
Mandarin In Town, a Chinese restaurant, opened recently in Burnsville, Minnesota.
People from all over the town flocked to Mandarin to find out how good it was. This
gave a big boost to the restaurant's initial business, but it caused the other restaurants
in the area to lose business temporarily. The way in which Mandarin in Town hurt
existing restaurants in Burnsville is an example of:
A. creative destruction.
B. service distortion.
C. innovative disruption.
D. crowdsourcing.
Creative destruction refers to the way that newly created goods, services, or firms can
hurt existing goods, services, or firms.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 2 Medium
Topic: Small Business and the Economy
74.
(p. 16)
According to the U.S. Small Business Administration, small businesses generate _____
times the number of patents per employee than do big businesses.
A. 35.5
B. 2.5
C. 16.5
D. 50.5
The U.S. Small Business Administration reports that among firms that hold one or more
patents, small businesses generate 16.5 times the number of patents per employee
than do big businesses.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
75.
(p. 18)
A nation where the major forces for jobs, revenues, and taxes come from farming or
extractive industries like forestry, mining, or oil production is a(n):
A. factor-driven economy.
B. efficiency-driven economy.
C. innovation-driven economy.
D. competency-driven economy.
A nation where the major forces for jobs, revenues, and taxes come from farming or
extractive industries like forestry, mining, or oil production is a factor-driven economy.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
76.
In factor-driven economies:
(p. 18)
A. entrepreneurship levels are in the middle range.
B. entrepreneurship levels are very high.
C. entrepreneurship levels are very low.
D. entrepreneurship is not given any consideration.
Entrepreneurship levels are very high in factor-driven economies.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 2 Medium
Topic: Small Business and the Economy
77.
(p. 18)
A nation where industrialization is the major force providing jobs, revenues and taxes,
and where minimizing costs while maximizing productivity is a major goal is a(n):
A. factor-driven economy.
B. efficiency-driven economy.
C. innovation-driven economy.
D. effectiveness-driven economy.
As economies develop and go beyond basic manufacturing to a more industrialized
economy, they are called efficiency-driven economies.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
78.
In efficiency-driven economies:
(p. 18)
A. entrepreneurship levels are in the middle range.
B. entrepreneurship levels are very high.
C. entrepreneurship levels are very low.
D. entrepreneurship is not given any consideration.
Entrepreneurship levels in efficiency-driven economies are in the middle range.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
79.
Innovation-driven economies:
(p. 19)
A. are those where entrepreneurship becomes a key way to build the middle class.
B. are nations where industrialization is becoming the major force providing jobs,
revenues, and taxes.
C. are focused on high-value-added manufacturing but are marked by a very large
service sector.
D. are those where entrepreneurship is essential to build personal wealth and break
the cycle of low-wage jobs.
Innovation-driven economies are focused on high-value-added manufacturing but are
marked by a very large service sector, providing high-end services to not only the
resident population, but also for export.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
80.
In innovation-driven economies:
(p. 19)
A. entrepreneurship levels are in the middle range.
B. entrepreneurship levels are very high.
C. entrepreneurship levels are lower compared to factor-driven economies.
D. entrepreneurship is not given any consideration.
Entrepreneurship levels in countries with innovation-driven economies average the
lowest of the three types of economies.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
81.
Virtual instant global entrepreneurship refers to:
(p. 19)
A. the transformation of a high-growth venture into a small business.
B. a person becoming an owner by inheriting or getting a stake in a family business.
C. the way that newly created goods, services, or firms hurt existing goods, services,
or firms.
D. a process that uses the Internet to quickly create businesses with a worldwide
reach.
Virtual instant global entrepreneurship is a process that uses the Internet to quickly
create businesses with a worldwide reach.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
82.
(p. 20)
Which of the following aspects of entrepreneurship refers to being in-tune with one's
market?
A. Efficiency
B. Creation
C. Customer-focus
D. Growth
Customer-focus refers to being in tune with one's market.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
83.
(p. 20)
The form of entrepreneurship in which a person or group own their own for-profit
business is referred to as:
A. independent entrepreneurship.
B. social entrepreneurship.
C. public entrepreneurship.
D. corporate entrepreneurship.
The form of entrepreneurship in which a person or group own their own for-profit
business is referred to as independent entrepreneurship.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
84.
(p. 20)
_____ is an aspect of entrepreneurship that refers to doing the most work with the
fewest resources.
A. Innovation
B. Creation
C. Efficiency
D. Customer-focus
Efficiency refers to doing the most work with the fewest resources.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
85.
(p. 20)
_____ is an aspect of entrepreneurship which looks at a new thing or a new way of
doing things.
A. Customer-focus
B. Innovation
C. Creation
D. Efficiency
Innovation looks at a new thing or a new way of doing things.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
86.
(p. 20)
Which of the following types of entrepreneurship typically concentrates on innovation
and customer-focus among all aspects of entrepreneurship?
A. Public entrepreneurship
B. Corporate entrepreneurship
C. Independent entrepreneurship
D. Social entrepreneurship
In corporate entrepreneurship, the focus is typically on customer-focus and innovation,
bringing new products or services to market, or opening up new markets to your firm.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
87.
Which of the following is true of corporate entrepreneurship?
(p. 20)
A. It involves the creation of self-sustaining charitable and civic organizations.
B. It involves revitalizing government agencies.
C. It is a form of entrepreneurship in which people own their own for-profit business.
D. It involves bringing new products or services to a market.
In corporate entrepreneurship, the focus is typically on customer-focus and innovation,
bringing new products or services to market, or opening up new markets for a firm.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
88.
Social entrepreneurship primarily involves a person or group:
(p. 20)
A. creating new charitable and civic organizations which are financially self-sufficient.
B. bringing new products or services to market.
C. owning their own for-profit business.
D. revitalizing government agencies.
Social entrepreneurship involves creating new charitable and civic organizations which
are financially self-sufficient, or for-profit companies that use much of their profit to fund
charities.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 2 Medium
Topic: Small Business and the Economy
89.
Which of the following is true of social entrepreneurship?
(p. 20)
A. It usually has a lot of funding.
B. It creates organizations which are usually financially dependent on other firms.
C. It cannot be initiated by a for-profit company.
D. It does not include innovation as a key element.
In social entrepreneurship, the key elements involve creation, efficiency, and customerfocus, since few social ventures have a lot of funding.
AACSB: Analytic
Blooms: Understand
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 2 Medium
Topic: Small Business and the Economy
90.
_____ is the degree of attention a target market pays to an idea or organization.
(p. 20)
A. Crowdfunding
B. Effectuation
C. Mindshare
D. Crowdfunding
Innovation-driven entrepreneurs are often as interested in having their idea used or
known—called mindshare—as making money.
AACSB: Analytic
Blooms: Remember
Learning Objective: 01-07 Recognize how small business is important to our economy and your community.
Level of Difficulty: 1 Easy
Topic: Small Business and the Economy
91.
Effectuation refers to:
(p. 21)
A. the degree of attention a target market pays to an idea or organization.
B. an approach used to create alternatives in uncertain environments.
C. transforming a high-growth venture into a small business.
D. a process of a person becoming an owner by inheriting or getting a stake in a family
business.
Effectuation is an approach used to create alternatives in uncertain environments.
Chapter 02 Small Business Entrepreneurs: Characteristics and
Competencies
True / False Questions
1.
There is one specific pattern of entrepreneurial behavior or entrepreneurial type.
(p. 30)
FALSE
There is no one pattern of entrepreneurial behavior or entrepreneurial type.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
2.
Passion is displayed by being persistently focused on the business.
(p. 30)
TRUE
Passion is displayed in three ways: (1) by looking at the challenges of the business in a
creative way, (2) by being persistently focused on the business, and (3) by being
absorbed by the tasks and concerns of the business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
3. Opportunistic planners always plan around the most important aspect of the business
first, act on it, and then consider if additional plans are needed.
(p. 31)
FALSE
Opportunistic planners generally start with a goal and look for opportunities to achieve
it. Once they find a good opportunity, even if it isn't the one related to their original goal,
they act on it, so it is very short term in orientation.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
4. Habit-based planners don't plan, and they don't even tend to react to changes in their
environments.
(p. 32)
TRUE
Habit-based planners do not really plan at all because their actions are dictated by their
routines. They do today what they did yesterday. They don't plan, and they don't even
tend to react to changes in their environments.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
5. A situation that occurs when businesses have founders or owners who are passionate
about one or two of the key business functions, such as sales, operations, accounting,
finance, or human resources is known as expert business professionalization.
(p. 32)
FALSE
A situation that occurs when all the major functions of a firm are conducted according
to the standard business practices of its industry is known as expert business
professionalization.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
6. Most successful entrepreneurs exhibit hard work, but completely lack in competencies.
(p. 34)
FALSE
All the entrepreneurial personality types aspects depend on hard work, but there are
other specific types of business-related expertise—called competencies—that appear
repeatedly in successful entrepreneurs around the world.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
7.
(p. 35)
The competency suggested by exchange relates to the organizational and business
processes of a firm called basic business competency.
FALSE
The competency suggested by boundary relates to the organizational and business
processes of a firm called basic business competency.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
8. Skills necessary to identify and exploit elements of the business environment that can
lead to a profitable and sustainable business are called opportunity competencies.
(p. 36)
TRUE
Exchange deals with the actual process of exploiting the opportunity for profit—which is
a fancy way of saying "making sales." The competencies that make this work are called
opportunity competencies, which include identifying an opportunity, a product, or
service idea that is likely to lead you to a profit and is ideally distinctive to your firm
and, you hope, hard for others to copy.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
9.
Succession challenges rarely affect family businesses.
(p. 37)
FALSE
There are two challenges typical to family businesses—role conflict and succession.
Succession is the process of intergenerational transfer of a business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 1 Easy
Topic: The Sociology of Entrepreneurs
10.
One of the major challenges identified for family businesses is role conflict.
(p. 37)
TRUE
There are two challenges typical to family businesses—role conflict and succession.
Role conflict describes the kind of problem that arises when people have multiple
responsibilities, such as parent and boss, and each makes different demands on them.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 1 Easy
Topic: The Sociology of Entrepreneurs
11.
Only one-third of family-owned businesses survive beyond the first generation.
(p. 39)
TRUE
Thirty-nine percent of U.S. family-owned businesses are expected to face the
retirement or semiretirement of their CEO within the next five years. This statistic grows
in importance if you factor in the idea that only one-third of family-owned businesses
survive beyond the first generation.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 1 Easy
Topic: The Sociology of Entrepreneurs
12. Succession plans deal with the people who will take over, what roles they will fill, and
what supports they will receive.
(p. 40)
TRUE
Succession plans deal with the people who will take over, what roles they will fill, and
what supports (such as training, outside assistance, voting power, resources control)
they will receive. Problems arise when there are no successors available within the
family.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 1 Easy
Topic: The Sociology of Entrepreneurs
13.
(p. 40)
One way to maximize communication in the succession process is to create a family
council.
TRUE
One way to maximize communication in the succession process is to create a family
council. A family council includes family members with immediate interests in the
business (spouse, sisters and brothers, older children, etc.). The focus of council
meetings is the business-family relationship. The meetings can also be a good forum
for grappling with issues like role expectations, commitment, and personal
responsibility.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 1 Easy
Topic: The Sociology of Entrepreneurs
14.
(p. 40)
In family-owned businesses, the board of members can only be comprised of family
members.
FALSE
The key difference between a family council and a board of directors is that the
function of the family council is to keep the family involved while the board is focused
on running the business. The board includes significant nonfamily membership.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 1 Easy
Topic: The Sociology of Entrepreneurs
15.
(p. 41)
The best way to handle ownership problems is to come out right at the start and
specify or negotiate who owns what.
TRUE
Ownership problems like this happen all the time in teams. The best way to handle it is
to come out right at the start and specify or negotiate who owns what. There is no one
"right" answer; it depends on how the group and their larger organization handle it.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-04 Recognize the special nature of entrepreneurial teams
Level of Difficulty: 1 Easy
Topic: The Thoughtful Entrepreneur
16.
The slowest growing sector of all U.S. businesses is women-owned businesses.
(p. 42)
FALSE
Women-owned businesses are one of the fastest growing sectors of all U.S.
businesses. Between 1997 and 2012, the number of private businesses with at least
51 percent female ownership increased by 54 percent, while the rate for firms overall
was 37 percent.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-05 Identify the challenges women and minority business owners face.
Level of Difficulty: 1 Easy
Topic: The Thoughtful Entrepreneur
17.Access problems for women- and minority-owned small businesses crop up most often
as discrimination in marketing.
(p. 43)
FALSE
Access problems for women- and minority-owned small businesses crop up most often
as discrimination in financing. This means that they may not be given the same access
to funds or contracting opportunities that white male-owned firms are given.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-05 Identify the challenges women and minority business owners face.
Level of Difficulty: 1 Easy
Topic: The Thoughtful Entrepreneur
18. For corporations, certification for businesses owned by women or minority is handled
by organizations that are not affiliated with the government or big business.
(p. 43)
TRUE
For corporations, certification is handled by organizations that are not affiliated with the
government or big business, such as the National Minority Supply and Diversity
Council or the Women's Business Enterprise National Council.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-05 Identify the challenges women and minority business owners face.
Level of Difficulty: 1 Easy
Topic: The Thoughtful Entrepreneur
19.
About a third of the retirees who return to work decide to become self-employed.
(p. 44)
TRUE
About a third of the retirees who return to work decide to become self-employed. Those
who do face three challenges—adjusting to the entrepreneurial life, reestablishing selfconfidence, and keeping personal finances out of the business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-06 Describe the situation of people who become business owners later in life.
Level of Difficulty: 1 Easy
Topic: Second Career Entrepreneurs
20.
One of the major issues identified for late career entrepreneurs is keeping personal
finances out of the business.
(p. 45)
TRUE
A problem for late career entrepreneurs is keeping personal finances out of the
business. Often when individuals are laid off or given early retirement, they can receive
lump-sum financial settlements. Frequently, people intending to become late career
entrepreneurs plan to use a substantial portion of these funds to start the new
business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-06 Describe the situation of people who become business owners later in life.
Level of Difficulty: 1 Easy
Topic: Second Career Entrepreneurs
Multiple Choice Questions
21.
Cognition:
(p. 30)
A. is a person's way of perceiving and thinking about his or her experience.
B.
refers to successful entrepreneurial behavior that leads to the creation of a new
firm.
C. pertains to the feeling of being absorbed by the tasks and concerns of the business.
D. does not help in making any managerial decisions.
Cognition is a person's way of perceiving and thinking about his or her experience.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
22.
(p. 30)
The visible behavior a person takes is known as:
A. promotion.
B. perception.
C. action.
D. cognition.
The visible behavior a person takes is known as action.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
23.
(p. 30)
Which of the following is one of the most common behaviors found in successful
entrepreneurs?
A. Preemption
B. Frigidness
C. Personalization
D. Passion
There are five aspects of behavior that most successful entrepreneurs display. These
are not the only possible behaviors that you could consider, but they are behaviors that
have been shown in the research to relate to success among entrepreneurs. The five
behaviors include passion, perseverance, promotion/prevention focus, planning style,
and professionalization.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
24.
(p. 30)
Which of the following is best thought of as a type of learned optimism in successful
entrepreneurs?
A. Apathy
B. Professionalization
C. Perseverance
D. Cognition
Perseverance is best thought of as a type of learned optimism, the ability to stick with
some activity even when it takes a long time, and when a successful or unsuccessful
outcome is not immediately known.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
25. _____ is the ability to stick with some activity even when it takes a long time, and when
a successful or unsuccessful outcome is not immediately known.
(p. 30)
A. Compatibility
B. Competence
C. Sustenance
D. Perseverance
Perseverance is best thought of as a type of learned optimism, the ability to stick with
some activity even when it takes a long time, and when a successful or unsuccessful
outcome is not immediately known.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
26.
(p. 31)
The problem behavior of trying the same action repeatedly without learning is called
_____.
A. perseveration
B. prevention focus
C. effectuation
D. critical observation
The danger is to keep trying the same action repeatedly without learning. That is a
problem behavior called perseveration.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
27.
Regulatory focus is a mix of _____ focus and _____ focus.
(p. 31)
A. effectuation; comprehension
B. comprehension; prevention
C. effectuation; promotion
D. promotion; prevention
Most of us have some mix of two internal focuses (also called our regulatory focus), a
promotion focus intent on maximizing gains, which gives us a bias toward pursuing
opportunities likely to lead to those gains, and a prevention focus intent on minimizing
losses, with a bias toward inaction or protective action. Being a successful
entrepreneur involves balancing the two focuses.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
28.
(p. 31)
A(n) _____ focus refers to an entrepreneur's attention on maximizing gains and
pursuing opportunities likely to lead to gains.
A. comprehension
B. promotion
C. effectuation
D. prevention
Most of us have some mix of two internal focuses (also called our regulatory focus), a
promotion focus intent on maximizing gains, which gives us a bias toward pursuing
opportunities likely to lead to those gains, and a prevention focus intent on minimizing
losses, with a bias toward inaction or protective action. Being a successful
entrepreneur involves balancing the two focuses.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
29. A(n) _____ focus refers to an entrepreneur's attention to minimizing losses, with a bias
toward inaction or protective action to avert loss.
(p. 31)
A. external
B. promotion
C. effectuation
D. prevention
Most of us have some mix of two internal focuses (also called our regulatory focus), a
promotion focus intent on maximizing gains, which gives us a bias toward pursuing
opportunities likely to lead to those gains, and a prevention focus intent on minimizing
losses, with a bias toward inaction or protective action. Being a successful
entrepreneur involves balancing the two focuses.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
30. Which of the following approaches yields better results in an established industry or a
poor one?
(p. 31)
A. External focus
B. Effectuation focus
C. Prevention focus
D. Promotion focus
Most of us have some mix of two internal focuses (also called our regulatory focus), a
promotion focus intent on maximizing gains, which gives us a bias toward pursuing
opportunities likely to lead to those gains, and a prevention focus intent on minimizing
losses, with a bias toward inaction or protective action. In an established industry or a
poor one, a prevention focus can work well, while a promotion focus can yield better
results in richer, dynamic, uncertain environments or industries.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
31.
(p. 31)
Which of the following approaches yields better results in richer, dynamic, uncertain
environments or industries?
A. Promotion focus
B. External focus
C. Effectuation focus
D. Prevention focus
Most of us have some mix of two internal focuses (also called our regulatory focus), a
promotion focus intent on maximizing gains, which gives us a bias toward pursuing
opportunities likely to lead to those gains, and a prevention focus intent on minimizing
losses, with a bias toward inaction or protective action. In an established industry or a
poor one, a prevention focus can work well, while a promotion focus can yield better
results in richer, dynamic, uncertain environments or industries.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
32. Entrepreneurs who develop long-range plans for all aspects of the business are known
as _____.
(p. 31)
A. critical-point planners
B. opportunistic planners
C. comprehensive planners
D. reactive planners
Comprehensive planners take a long-term view, develop long-range plans for all
aspects of the business, are comfortable with planning, and act based on the plans
they've developed.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
33. Christopher is a hard-working entrepreneur who looked into all the details of his small
gaming software business. He focused on all aspects of the business from the initial
launch, promotion, and marketing aspects to the final set up. He finds planning
convenient and works according to a plan. Christopher is a(n) _____.
(p. 31)
A. opportunistic planner
B. habit-driven planner
C. reactive planner
D. comprehensive planner
Comprehensive planners take a long-term view, develop long-range plans for all
aspects of the business, are comfortable with planning, and act based on the plans
they've developed.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 2 Medium
Topic: The Psychology of Entrepreneurs
34.
(p. 31)
Entrepreneurs who develop plans focused on the most important aspect of the
business first are known as _____.
A. critical-point planners
B. opportunistic planners
C. comprehensive planners
D. reactive planners
Critical-point planners plan around the most important aspect of the business first, act
on it, and then consider if additional plans are needed. It is not a very long-term
approach to planning.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
35.
Which among the following is a critical-point planner?
(p. 31)
A.
Amanda does not have a very long-term approach to planning and she plans only
for those business aspects that are of paramount importance.
B. Andrew looks at all aspects of the business, from launch to the complete working of
it.
C. Cathy looks for a good chance to achieve her goal and acts according to a routine.
D. Joshua acts on what he has been doing and does not believe in planning.
Critical-point planners plan around the most important aspect of the business first, act
on it, and then consider if additional plans are needed. It is not a very long-term
approach to planning.
AACSB: Analytic
Blooms: Understand
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 2 Medium
Topic: The Psychology of Entrepreneurs
36. Entrepreneurs who start with a goal instead of a plan and look for a chance to achieve
it are known as _____.
(p. 31)
A. reactive planner
B. critical-point planner
C. comprehensive planner
D. opportunistic planner
Opportunistic planners generally start with a goal and look for opportunities to achieve
it. Once they find a good opportunity, even if it isn't the one related to their original goal,
they act on it, so it is very short term in orientation.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
37.
Which of the following would have a very short-term approach to planning?
(p. 31)
A.
Individuals who look for opportunities to achieve their goal, even if the opportunity
isn't the one related to their original goal.
B.
Individuals who develop long-range plans for all aspects of the business and act
based on the plans they've developed.
C. Individuals who plan around the most important aspect of the business first, act on
it, and then consider if additional plans are needed.
D.Individuals who are comfortable with planning and act based on the plans they have
developed.
Opportunistic planners generally start with a goal and look for opportunities to achieve
it. Once they find a good opportunity, even if it isn't the one related to their original goal,
they act on it, so it is very short term in orientation.
AACSB: Analytic
Blooms: Understand
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 2 Medium
Topic: The Psychology of Entrepreneurs
38._____ are completely passive, waiting for cues from the environment to determine what
actions to take.
(p. 31)
A. Opportunistic planners
B. Critical-point planners
C. Comprehensive planners
D. Reactive planners
Reactive planners are completely passive, waiting for cues from the environment to
determine what actions to take. Their focus is entirely short term, and there is little in
the way of goals driving their efforts. They can make the most of a situation because
there is no other plan competing for their attention.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
39.
Reactive planners:
(p. 31)
A. do not react to cues from the environment.
B. take a long-term view and develop long-range plans for all aspects of the business.
C. focus on short-term plans.
D. have fixed goals dictating their efforts.
Reactive planners are completely passive, waiting for cues from the environment to
determine what actions to take. Their focus is entirely short term, and there is little in
the way of goals driving their efforts. They can make the most of a situation because
there is no other plan competing for their attention.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
40. Entrepreneurs who do not plan and prefer to let all actions be dictated by their routines
are known as _____.
(p. 32)
A. habit-based planners
B. critical-point planners
C. reactive planners
D. comprehensive planners
Habit-based planners do not really plan at all because their actions are dictated by their
routines. They do today what they did yesterday. They don't plan, and they don't even
tend to react to changes in their environments.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
41.
Which of the following characterizes a habit-based planner?
(p. 32)
A.
They take a long-term view, develop long-range plans for all aspects of the
business, are comfortable with planning, and act based on the plans they've
developed.
B. They plan around the most important aspect of the business first, act on it, and then
consider if additional plans are needed.
C.
They are completely passive and generally wait for cues from the environment to
determine what actions to take.
D. They don't plan, and they don't tend to react to changes in their environments.
Habit-based planners do not really plan at all because their actions are dictated by their
routines. They do today what they did yesterday. They don't plan, and they don't even
tend to react to changes in their environments.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
42.Which of the following planners do best in terms of getting a start-up launched, keeping
it going, and making a living from it?
(p. 32)
A. Comprehensive planners
B. Habit-based planners
C. Opportunistic planners
D. Reactive planners
Simply put, results from small business owners in countries around the world have
shown that in terms of getting a start-up launched, keeping it going, and making a living
from it, comprehensive planners do the best, followed by critical point planners, and
opportunistic planning types. Reactive and habit planners generally do very poorly in
business, even if they manage to get their firms started.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
43.
(p. 32)
Which of the following kinds of planners generally tend do very poorly in business,
even if they do manage to get their firms started?
A. Comprehensive planners
B. Habit-based planners
C. Opportunistic planners
D. Critical-point planners
Simply put, results from small business owners in countries around the world have
shown that in terms of getting a start-up launched, keeping it going, and making a living
from it, comprehensive planners do the best, followed by critical point planners, and
opportunistic planning types. Reactive and habit planners generally do very poorly in
business, even if they manage to get their firms started.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
44.
(p. 32)
The extent to which a firm meets or exceeds the standard business practices for its
industry is known as _____.
A. bootstrapping
B. professionalization
C. effectuation
D. Perceived Organizational Support (POS)
The extent to which a firm meets or exceeds the standard business practices for its
industry is known professionalization. One hallmark of successful entrepreneurs is that
they usually do at least one thing much better than average. That average is called a
standard business practice and every industry has them. Doing that level or better is
what professionalization is all about.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
45.
(p. 32)
A business action that has been widely adopted within an industry or occupation is
known as _____.
A. best business practice
B. specialized business professionalization
C. standard business practice
D. expert professionalization
One hallmark of successful entrepreneurs is that they usually do at least one thing
much better than average. That average is called a standard business practice and
every industry has them. Doing that level or better is what professionalization is all
about.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
46.
(p. 32)
Which of the following refers the three levels of professionalization?
A. Low, medium, and high
B. Company, industry, and global
C. Personal, team, and organizational
D. Expert, specialized, and minimalized
There are three levels of professionalization: expert professionalization when most
aspects of the business meet or exceed the industry's standards, specialized when one
or two aspects of the business are at this level, or minimalized when none of the
business can achieve the industry standard.
AACSB: Analytic
Blooms: Understand
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 2 Medium
Topic: The Psychology of Entrepreneurs
47. A situation that occurs when all the major functions of a firm are conducted according
to the standard business practices of its industry is known as _____.
(p. 32)
A. expert business professionalization
B. specialized business professionalization
C. minimized business professionalization
D. maximized business professionalization
A situation that occurs when all the major functions of a firm are conducted according
to the standard business practices of its industry is known as expert business
professionalization.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
48.
Expert business professionalization is a situation that occurs:
(p. 32)
A. when only the most critical aspect of business is met.
B. when most aspects of the business meet or exceed the industry's standards.
C. when one or two aspects of the business are met.
D. when none of the business can achieve the industry standard.
There are three levels of professionalization: expert professionalization when most
aspects of the business meet or exceed the industry's standards, specialized when one
or two aspects of the business are at this level, or minimalized when none of the
business can achieve the industry standard.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
49. A situation that occurs when businesses have founders or owners who are passionate
about one or two of the key business functions, such as sales, operations, accounting,
finance, or human resources is known as _____.
(p. 32)
A. expert business professionalization
B. specialized business professionalization
C. minimized business professionalization
D. maximized business professionalization
A situation that occurs when businesses have founders or owners who are passionate
about one or two of the key business functions, such as sales, operations, accounting,
finance, or human resources is known as specialized business professionalization.
There are three levels of professionalization: expert professionalization when most
aspects of the business meet or exceed the industry's standards, specialized when one
or two aspects of the business are at this level, or minimalized when none of the
business can achieve the industry standard.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
50.
(p. 32)
A situation that occurs when the entrepreneur does nearly everything in the simplest
way possible is known as _____.
A. expert business professionalization
B. specialized business professionalization
C. minimalized business professionalization
D. maximized business professionalization
A situation that occurs when the entrepreneur does nearly everything in the simplest
way possible is known as minimized business professionalization. There are three
levels of professionalization: expert professionalization when most aspects of the
business meet or exceed the industry's standards, specialized when one or two
aspects of the business are at this level, or minimalized when none of the business can
achieve the industry standard.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
51. Which of the following is true with regard to minimalized business professionalization?
(p. 32)
A. The entrepreneur does nearly everything in the simplest way possible.
B. The entrepreneur is passionate about one or two of the key business functions.
C. The entrepreneur meets or exceeds the industry's standards.
D. The entrepreneur brings the highest levels of trust among customers.
A situation that occurs when the entrepreneur does nearly everything in the simplest
way possible is known as minimalized business professionalization.
AACSB: Analytic
Blooms: Understand
Learning Objective: 02-01 Recognize the key aspects of entrepreneurial personality.
Level of Difficulty: 2 Medium
Topic: The Psychology of Entrepreneurs
52.
Competencies are defined as:
(p. 34)
A. forms of business-related expertise.
B. forms of personal development model.
C. different forms of self-assessment.
D. different forms of personality theories.
All the entrepreneurial personality types aspects depend on hard work, but there are
other specific types of business-related expertise—called competencies—that appear
repeatedly in successful entrepreneurs around the world.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
53.
Getting the business organized and registered is an example of _____ competency.
(p. 35)
A. opportunity
B. resource
C. industry-specific
D. boundary
The competency suggested by boundary relates to the organizational and business
processes of a firm. This type of expertise can be called basic business competency.
There are certain fundamental activities that all businesses must perform, which are
called the key business functions, and include sales, operations (also called
production), accounting, finance, and human resources. Getting organized and
registered—which creates the boundary—is an example of an operations activity.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
54.
The competency suggested by _____ relates to the organizational and business
processes of a firm.
(p. 35)
A. intention
B. resource
C. exchange
D. boundary
The competency suggested by boundary relates to the organizational and business
processes of a firm. This type of expertise can be called basic business competency.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
55.
Key business functions:
(p. 35)
A.
are skills necessary to identify and exploit elements of the business environment
that can lead to a profitable and sustainable business.
B. are activities that reflects a person's determination to start their business and make
it a success.
C. are certain fundamental activities that all businesses must perform.
D. are business-related activities that are optional for the entrepreneur to perform.
There are certain fundamental activities that all businesses must perform, which are
called the key business functions, and include sales, operations (also called
production), accounting, finance, and human resources.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
56. Activities common to all businesses such as sales, operations (also called production),
accounting, finance, and human resources are known as _____.
(p. 35)
A. key business functions
B. competencies
C. business accreditations
D. business-related expertise
Activities common to all businesses such as sales, operations (also called production),
accounting, finance, and human resources are known as key business functions.
These are certain fundamental activities that all businesses must perform.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
57. Certain businesses demand higher safety related rules. For example, window cleaners
that specialize in high-rise buildings have certain rules and safety protocols. These
specific rules would comprise the _____.
(p. 35)
A. specialized business professionalization
B. infant-industry argument
C. industry-specific knowledge
D. key business functions
Activities, knowledge, and skills specific to businesses in a particular industry is known
as industry-specific knowledge. A restaurant really is different from a mechanic's shop
or a computer store or a portrait studio. Each requires you to understand a particular
industry and market, and each requires a very particular kind of skill.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
58. The ability or skill of the entrepreneur at finding expendable components necessary to
the operation of the business such as time, information, location, financing, raw
materials, and expertise is known as_____.
(p. 35)
A. basic business competencies
B. resource competencies
C. opportunity competencies
D. determination competencies
The ability or skill of the entrepreneur at finding expendable components necessary to
the operation of the business such as time, information, location, financing, raw
materials, and expertise is known as resource competencies. Resources lead to
specific resource competencies. For even the smallest part-time business, the
entrepreneur needs to find or gain access to resources such as time, information,
financing, space for the business, raw materials, and a variety of people (advisers,
suppliers, service providers, customers).
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
59. Which of the following competencies requires the energy and focus needed to bring a
business into existence?
(p. 35)
A. Determination competencies
B. Resource competencies
C. Opportunity competencies
D. Basic business competencies
Determination competencies are skills identified with the energy and focus needed to
bring a business into existence. They are demonstrated by focusing on your business
over other choices and being ready to find out about and do what it takes to pursue
opportunities that will help get the business going.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
60.
(p. 35)
Martin runs a successful house painting business. He runs his business out of his
garage, which he got converted into an office space. Martin, who had previously
worked as a house painter in another company had good know-how of how to run a
house-painting business. After a storm destroyed public properties in his neighboring
town, he contracted with the mayor of that town to fulfill any painting jobs required
during the town's reconstruction. In order to meet this demand and expand business,
he hired more house painters.
According to the BRIE model, which of the following is an example of Martin's basic
business competency?
A. Martin hiring more house painters to meet demand
B. Martin contracting with the mayor to help paint during reconstruction
C. Martin getting his company registered
D. Martin having prior knowledge of the house-painting business
The competency suggested by boundary relates to the organizational and business
processes of a firm. This type of expertise can be called basic business competency.
There are certain fundamental activities that all businesses must perform, which are
called the key business functions, and include sales, operations (also called
production), accounting, finance, and human resources. Getting organized and
registered—which creates the boundary—is an example of an operations activity.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 3 Hard
Topic: The Psychology of Entrepreneurs
61.
(p. 35)
Martin runs a successful house painting business. He runs his business out of his
garage, which he got converted into an office space. Martin, who had previously
worked as a house painter in another company had good know-how of how to run a
house-painting business. After a storm destroyed public properties in his neighboring
town, he contracted with the mayor of that town to fulfill any painting jobs required
during the town's reconstruction. In order to meet this demand and expand business,
he hired more house painters.
According to the BRIE model, which of the following provides industry-specific
knowledge to martin?
A. Martin hiring more house painters to meet demand
B. Martin contracting with the mayor to help paint during reconstruction
C. Martin getting his company registered
D.
Martin having worked in a house-painting company before starting his own
business
Activities, knowledge, and skills specific to businesses in a particular industry are
known as industry-specific knowledge. Some of these skills focus on knowing your new
business and its context.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 3 Hard
Topic: The Psychology of Entrepreneurs
62.
(p. 35)
Martin runs a successful house painting business. He runs his business out of his
garage, which he got converted into an office space. Martin, who had previously
worked as a house painter in another company had good know-how of how to run a
house-painting business. After a storm destroyed public properties in his neighboring
town, he contracted with the mayor of that town to fulfill any painting jobs required
during the town's reconstruction. In order to meet this demand and expand business,
he hired more house painters.
According to the BRIE model, which of the following is an example of Martin's resource
competency?
A. Martin hiring more house painters to meet demand
B. Martin contracting with the mayor to help paint during reconstruction
C. Martin setting up the business's office in his garage
D. Martin having prior knowledge of the house-painting business
Resources lead to specific resource competencies. For even the smallest part-time
business, the entrepreneur needs to find or gain access to resources such as time,
information, financing, space for the business, raw materials, and a variety of people.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 3 Hard
Topic: The Psychology of Entrepreneurs
63.
(p. 36)
Martin runs a successful house painting business. He runs his business out of his
garage, which he got converted into an office space. Martin, who had previously
worked as a house painter in another company had good know-how of how to run a
house-painting business. After a storm destroyed public properties in his neighboring
town, he contracted with the mayor of that town to fulfill any painting jobs required
during the town's reconstruction. In order to meet this demand and expand business,
he hired more house painters.
According to the BRIE model, which of the following is an example of Martin's
opportunity competency?
A. Martin hiring more house painters to meet demand
B. Martin contracting with the mayor to help paint during reconstruction
C. Martin setting up the business's office in his garage
D. Martin deciding to set up his own business after quitting his previous job
Exchange deals with the actual process of exploiting the opportunity for profit—which is
a fancy way of saying "making sales." The competencies that make this work are called
opportunity competencies, which include identifying an opportunity, a product, or
service idea that is likely to lead you to a profit and is ideally distinctive to your firm
and, you hope, hard for others to copy.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 3 Hard
Topic: The Psychology of Entrepreneurs
64.
(p. 36)
Which of the following deals with the actual process of exploiting an opportunity for
profit?
A. Resource
B. Exchange
C. Intention
D. Boundary
Exchange deals with the actual process of exploiting the opportunity for profit—which is
a fancy way of saying "making sales."
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
65. Which of the following relates to the skills necessary to identify and exploit elements of
the business environment that can lead to a profitable and sustainable business?
(p. 36)
A. Determination competencies
B. Basic business competencies
C. Resource competencies
D. Opportunity competencies
Opportunity competencies include identifying an opportunity, a product, or service idea
that is likely to lead you to a profit and is ideally distinctive to your firm and, you hope,
hard for others to copy.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-02 Assess the operational competencies of the successful entrepreneur.
Level of Difficulty: 1 Easy
Topic: The Psychology of Entrepreneurs
66.
Which of the following comprises a family business?
(p. 37)
A. A firm in which two or more families own a stake in a company but with no authority
for daily management
B. A firm in which no family members are involved in the management of the business
C. A firm in which two or more families are involved in the occasional management of
the business
D. A firm in which one family owns a majority stake
Defined as firms with a majority family ownership and direct daily family involvement,
family business is a major economic force, employing 58 percent of America's total
workforce.
AACSB: Analytic
Blooms: Understand
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 2 Medium
Topic: The Sociology of Entrepreneurs
67.
(p. 37)
Which of the following is a major economic force, employing 58 percent of America's
total workforce?
A. Public companies
B. Government enterprises
C. Family businesses
D. International assignments
Defined as firms with a majority family ownership and direct daily family involvement,
family business is a major economic force, employing 58 percent of America's total
workforce.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 1 Easy
Topic: The Sociology of Entrepreneurs
68.
(p. 37)
Which of the following is true as an advantage of businesses run by a group of tightknit family members?
A. Succession issues don't crop up in family-owned businesses.
B. Role conflicts never happen in family owned businesses.
C. Board of members is not used in family-owned businesses.
D. Communication-based integration is most effective in family-owned business.
Small, family-owned businesses have many advantages. If the business is managed at
the top by a group of tight-knit family members, communication-based integration can
be more effective, and decision making can be easier and quicker.
AACSB: Analytic
Blooms: Understand
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 2 Medium
Topic: The Sociology of Entrepreneurs
69.
Which of the following challenges is typical to family businesses?
(p. 37)
A. Motivation and nepotism
B. Role conflict and succession
C. Succession and finances
D. Leadership and finances
There are two challenges typical to family businesses—role conflict and succession.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 1 Easy
Topic: The Sociology of Entrepreneurs
70.
(p. 37)
Which of the following best describes the problem that arises when people have
multiple responsibilities and each makes different demands on them?
A. Role conflict
B. Succession issues
C. Strategizing challenges
D. Leadership constraints
Role conflict describes the kind of problem that arises when people have multiple
responsibilities, such as parent and boss, and each makes different demands on them.
Role conflict is at its worst when people fail to recognize it.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 1 Easy
Topic: The Sociology of Entrepreneurs
71.
Which of the following is the most effective approach for avoiding role conflict?
(p. 38)
A. Keep family issues out of the family business
B. Keep separate rules for family members and employees
C. Have constant role reversals
D. Have decisions narrowed down for family members based on family necessities
For family business, the most effective approach for avoiding role conflict is to keep
family issues out of the family business. Whenever possible, try and make decisions
based on business necessities.
AACSB: Analytic
Blooms: Understand
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 2 Medium
Topic: The Sociology of Entrepreneurs
72.
Which of the following problems is closely related to role conflict?
(p. 38)
A. Resource shortage
B. Lack of skills
C. Shortage of time
D. Perseverance
Role conflict breeds another unending problem—the shortage of time. Entrepreneurs
are among the most rushed people in the workforce. Part of this comes from the
responsibilities of ownership.
AACSB: Analytic
Blooms: Understand
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 2 Medium
Topic: The Sociology of Entrepreneurs
73.
(p. 38)
The organizing process to help make the most efficient use of the day is known as
_____.
A. promotion focus
B. competence
C. certification
D. time management
The organizing process to help make the most efficient use of the day is known as time
management.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 1 Easy
Topic: The Sociology of Entrepreneurs
74.
Only _____ of family-owned businesses survive beyond the first generation.
(p. 39)
A. three-quarters
B. one-half
C. one-fourth
D. one-third
Thirty-nine percent of U.S. family-owned businesses are expected to face the
retirement or semiretirement of their CEO within the next five years. This statistic grows
in importance if you factor in the idea that only one-third of family-owned businesses
survive beyond the first generation.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 1 Easy
Topic: The Sociology of Entrepreneurs
75.
____ refers to the process of intergenerational transfer of business.
(p. 39)
A. Role conflict
B. Succession
C. Certification
D. Access
When the current owners are ready to think about what follows them, we get into
succession—the process of intergenerational transfer of a business. Often the lack of a
clear succession plan is the death knell for those family firms facing their first
intergenerational transition.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 1 Easy
Topic: The Sociology of Entrepreneurs
76.
Which of the following statements is true about a family council?
(p. 40)
A.
It helps to maximize communication in the succession process of family
businesses.
B. Its main function is complete the key business activities of a family business.
C.
It includes family members with immediate interests in the business and a
significant number of non-family members.
D. It is not a good forum for grappling with issues like role expectations, commitment,
and personal responsibility.
One way to maximize communication in the succession process is to create a family
council. A family council includes family members with immediate interests in the
business (spouse, sisters and brothers, older children, etc.). The focus of council
meetings is the business-family relationship. The meetings can also be a good forum
for grappling with issues like role expectations, commitment, and personal
responsibility
AACSB: Analytic
Blooms: Understand
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 2 Medium
Topic: The Sociology of Entrepreneurs
77.
Which of the following organizations tracks experts in family business?
(p. 40)
A. Association for Family Business Foundations
B. Association for Small Business Entrepreneurs
C. Family Business Management Institute
D. Family Firm Institute
For family councils and boards of advisers, it is often helpful to get professional advice
at the start, and then continue on your own. One organization that tracks experts in
family business is the Family Firm Institute.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-03 Describe the challenges of family business owners.
Level of Difficulty: 1 Easy
Topic: The Sociology of Entrepreneurs
78.
Which of the following statements about entrepreneurial teams is true?
(p. 40)
A. Most entrepreneurial teams are family related.
B.
The majority of new businesses have an entrepreneurial team of a minimum five
co-owners.
C. The trend is toward even more businesses being developed by a solo entrepreneur.
D. Only 10 percent of teams are spouses or life partners working together.
While the classic image of the entrepreneurial small business would involve the image
of the solo entrepreneur, the modern reality is different. The majority of new
businesses have a team of two or more co-owners, and the trend is toward even more
businesses being developed by teams of entrepreneurs. Most teams are family related.
In fact 53 percent of teams are spouses or life partners working together.
AACSB: Analytic
Blooms: Understand
Learning Objective: 02-04 Recognize the special nature of entrepreneurial teams
Level of Difficulty: 2 Medium
Topic: The Sociology of Entrepreneurs
79.
(p. 42)
Which of the following is true with regard to women in small businesses?
A. Women-owned businesses are the slowest growing sector of all U.S. businesses.
B.
Women-owned firms accounted for 25 percent of small business revenue
nationally.
C. Women prefer less-risky firms, which also tend to be firms with lower returns.
D. Women prefer more high-tech firms, as well as firms where technology is central to
the business than men.
The entrepreneurs' goals in starting the business might also play a role. For example
men more often mention making money as a motivation, while women more often
mention having flexibility for personal and family life. The overall growth strategies also
differ, with more women choosing single-person lifestyle firms over the small business
forms that employ others. Along these strategy lines, women prefer less-risky firms,
which also tend to be the firms with lower returns.
AACSB: Analytic
Blooms: Understand
Learning Objective: 02-05 Identify the challenges women and minority business owners face.
Level of Difficulty: 2 Medium
Topic: The Thoughtful Entrepreneur
80.
(p. 43)
Qualification for _____ requires certification as a business owned and operated by a
woman or a minority.
A. set-asides
B. codicils
C. product liability insurance
D. professional liability insurance
Qualification for set-asides requires certification as a business owned and operated by
a woman or a minority (or both).
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-05 Identify the challenges women and minority business owners face.
Level of Difficulty: 1 Easy
Topic: The Thoughtful Entrepreneur
81.
Which of the following is true with regard to minorities in small businesses?
(p. 43)
A. Minority-owned firms have not grown much in recent years and are a slow growing
sector.
B. The establishment of both public and private funding and networking initiatives has
helped to level the business playing field for minority entrepreneurs.
C. There is a phenomenal decline in the number of minority entrepreneurs despite the
growth of racial and ethnic groups within the U.S. population.
D. Minority entrepreneurs do not face the challenge of access anymore.
Several reasons account for the phenomenal growth in the number of minority
entrepreneurs. The establishment of both public and private funding and networking
initiatives has helped to level the business playing field for minority entrepreneurs by
offering information, advice, and funding access. Another explanation lies in the growth
of racial and ethnic groups within the U.S. population, a trend that is expected to
continue.
AACSB: Analytic
Blooms: Understand
Learning Objective: 02-05 Identify the challenges women and minority business owners face.
Level of Difficulty: 2 Medium
Topic: The Thoughtful Entrepreneur
82.The two fastest growing minority groups that represent the largest segments of minority
business owners are:
(p. 43)
A. Hispanics and African Americans.
B. Hispanics and Pacific Islanders.
C. Asians and African Americans.
D. Asians and Pacific Islanders.
The two fastest growing minority groups (Hispanics and African Americans) represent
the largest segments of minority business owners. Hispanics represent 46 percent of
all ethnic business owners, Asians 25 percent, and African Americans 24 percent.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-05 Identify the challenges women and minority business owners face.
Level of Difficulty: 1 Easy
Topic: The Thoughtful Entrepreneur
83.
(p. 43)
The challenge of _____ refers to when woman or minority-owned businesses are
simply excluded from the opportunities offered to firms owned by white males.
A. consistency
B. access
C. flexibility
D. mutuality
Despite the growth in the number of women and minority entrepreneurs, both groups
still face the challenge of access. Access refers to the simplest form of
discrimination—often women- or minority-owned firms are simply excluded from the
opportunities offered to firms owned by white males. This can result from the way that
networks built from interpersonal relations in business exclude women and minorities.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-05 Identify the challenges women and minority business owners face.
Level of Difficulty: 1 Easy
Topic: The Thoughtful Entrepreneur
84.
(p. 43)
Identify the simplest form of discrimination with regard to women and minority
entrepreneurs within the U.S. population.
A. Certification
B. Role conflict
C. Access
D. Collusion
Despite the growth in the number of women and minority entrepreneurs, both groups
still face the challenge of access. Access refers to the simplest form of
discrimination—often women- or minority-owned firms are simply excluded from the
opportunities offered to firms owned by white males. This can result from the way that
networks built from interpersonal relations in business exclude women and minorities.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-05 Identify the challenges women and minority business owners face.
Level of Difficulty: 1 Easy
Topic: The Thoughtful Entrepreneur
85.Access problems for women- and minority-owned small businesses crop up most often
as:
(p. 43)
A. differences in labeling.
B. discrimination in financing.
C. problems involved in business contacts.
D. the presence and absence of certain skills.
Access problems for women- and minority-owned small businesses crop up most often
as discrimination in financing.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-05 Identify the challenges women and minority business owners face.
Level of Difficulty: 1 Easy
Topic: The Thoughtful Entrepreneur
86. Government contracting funds which are earmarked for particular kinds of firms, such
(p. 43)
as small businesses, minority-owned firms, women-owned firms, and the like, are
known as _____.
A. collective investment scheme
B. cooperative fund
C. certified items
D. set-asides
There are two solutions for access-based challenges. One solution is institutional,
when minority and women-owned small businesses pursue dedicated contracting
funds, known as set-asides, among big companies and government agencies. The
good news is that governments at all levels have special contracting opportunities for
small businesses that are owned and operated by minorities or women.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-05 Identify the challenges women and minority business owners face.
Level of Difficulty: 1 Easy
Topic: The Thoughtful Entrepreneur
87.
(p. 44)
An examination based acknowledgement that the firm is owned and operated as
specified is known as _____.
A. performance analysis
B. certification
C. multi source assessment
D. homologation
An examination based acknowledgement that the firm is owned and operated as
specified is known as certification. For those businesses that qualify, certification
provides a ready means of access to opportunity and to networks of businesses and
government agencies which can be leveraged to gain access to other sectors of
business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-05 Identify the challenges women and minority business owners face.
Level of Difficulty: 1 Easy
Topic: The Thoughtful Entrepreneur
88. Which of the following statements about certification with regard to women- or minorityowned small business is true?
(p. 44)
A. Most corporate certification programs require a business to be in operation at least
five years.
B. Certification is for every women or minority-owned small business.
C. For those businesses that qualify, certification provides a ready means of access to
opportunity and to networks of businesses and government agencies.
D. For corporations, certification is handled by organizations that are affiliated with the
government or big business.
Certification is not for every women- or minority-owned small business. For those
businesses that qualify, certification provides a ready means of access to opportunity
and to networks of businesses and government agencies which can be leveraged to
gain access to other sectors of business.
AACSB: Analytic
Blooms: Understand
Learning Objective: 02-05 Identify the challenges women and minority business owners face.
Level of Difficulty: 2 Medium
Topic: The Thoughtful Entrepreneur
89.
_____ entrepreneurs are people who begin their business after having retired or
resigned from work in corporations at or after the age of 50.
(p. 44)
A. Occasional
B. Helical
C. Late career
D. Veteran
Late career entrepreneurs (also known as second career entrepreneurs) are people
who begin their businesses after having retired or resigned from work in corporations at
age 50 or later. Whether these individuals start their business as part of a
postretirement career plan or after early retirement has forced them to reevaluate their
lives, a late career as a business owner has become a necessity for them.
AACSB: Analytic
Blooms: Remember
Learning Objective: 02-06 Describe the situation of people who become business owners later in life.
Level of Difficulty: 1 Easy
Topic: Second Career Entrepreneurs
90.
Which of the following is an example of a second career entrepreneur?
(p. 44)
A.
Cynthia, a 24-year-old, starting a consultancy business after graduating from
college.
B.
Mark, a 30-year-old, starting a new business venture in stock trading after the
failure of his previous business in real estate.
C. Ursula, a 60-year-old, starting a business in shrimp trading after being retired for 5
years.
D. Timothy, a 62-year-old, joining a real estate agency as a sales representative, after
being retied for 4 years.
Late career entrepreneurs (also known as second career entrepreneurs) are people
who begin their businesses after having retired or resigned from work in corporations at
age 50 or later. Whether these individuals start their business as part of a
postretirement career plan or after early retirement has forced them to reevaluate their
lives, a late career as a business owner has become a necessity for them.
AACSB: Analytic
Blooms: Understand
Learning Objective: 02-06 Describe the situation of people who become business owners later in life.
Level of Difficulty: 2 Medium
Topic: Second Career Entrepreneurs
91.
(p. 45)
Which of the following is one of the prime challenges faced by most second career
entrepreneurs?
A. Keeping personal finances out of the business
B. Avoiding overconfidence
C. Lacking resources
D. Deciding whether to return to work
A problem for second career entrepreneurs is keeping personal finances out of the
business. Often when individuals are laid off or given early retirement, they can receive
lump-sum financial settlements. Frequently, people intending to become late career
entrepreneurs plan to use a substantial portion of these funds to start the new
business. They fail to carefully consider how they will invest the money in the business,
and how it will be used. Taking the easy way out can often mean late career
entrepreneurs underprepare for the rigors of business, and they are risking their
retirement nest egg.
Chapter 03 Small Business Ideas: Creativity, Opportunity, and
Feasibility
True / False Questions
1.
(p. 82)
Search and capture of new ideas that lead to business opportunities is called
opportunity recognition.
TRUE
Search and capture of new ideas that lead to business opportunities is called
opportunity recognition.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
2. According to the Panel Study of Entrepreneurial Dynamics, the business idea and the
decision to start a business were simultaneous for a majority of entrepreneurs.
(p. 83)
FALSE
According to the Panel Study of Entrepreneurial Dynamics, the decision to start a
business came first for a majority of entrepreneurs.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 2 Medium
Topic: The Source of Business Ideas
3.
Hobbies cannot be turned into successful businesses.
(p. 83)
FALSE
Many people find a way to turn their hobbies into successful businesses.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
4. A license is a legal agreement that grants rights to use a particular piece of intellectual
property.
(p. 85)
TRUE
A license is a legal agreement that grants rights to use a particular piece of intellectual
property.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
5.
In entrepreneurship, every good idea is a viable business opportunity.
(p. 86)
FALSE
Every good idea is not a viable business opportunity.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-02 Identify the way ideas are evaluated for business potential.
Level of Difficulty: 1 Easy
Topic: Screening Ideas
6.
A typical Idea To Product (I2P) analysis consists of a one-page response to eight
about the product, three about the process, and one about the people.
(p. 87) questions—four
FALSE
A typical I2P analysis consists of a one-page response to seven questions—two about
the product, four about the market, and one about intellectual property protection.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-02 Identify the way ideas are evaluated for business potential.
Level of Difficulty: 2 Medium
Topic: Screening Ideas
7.
The SCAMPER tool is based on the work of Alex Osborne.
(p. 89)
TRUE
The SCAMPER tool is based on the work of Alex Osborne.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
8.
"S" in the creativity tool SCAMPER stands for summarize.
(p. 89)
FALSE
In the SCAMPER tool, "S" stands for substitute.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
9.
"C" in the SCAMPER tool stands for copy.
(p. 89)
FALSE
In the SCAMPER tool, "C" stands for combine.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
10.
The SCAMPER tool is effective for solving problems only in traditional ways.
(p. 91)
FALSE
SCAMPER is a very effective method for helping business owners and their employees
come up with alternative solutions and opportunities.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
11.
Correlation is one of the four stages in the creative process.
(p. 91)
FALSE
The four stages of the creative process are preparation, incubation, illumination, and
verification.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
12.
(p. 92)
One of the ways to practice the business of innovation is to invite someone who was
never included before in a meeting for solving a problem.
TRUE
One of the ways to practice the business of innovation is to invite someone who was
never included before in a meeting for solving a problem or searching for a new
opportunity.
AACSB: Reflective Thinking
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: Getting into an Innovative Frame of Mind
13. Research suggests that the first good idea entrepreneurs come up with is always the
best.
(p. 92)
FALSE
The first good idea is rarely the best.
AACSB: Analytic
Blooms: Understand
Learning Objective: 04-04 Understand the five pitfalls that hinder innovation.
Level of Difficulty: 2 Medium
Topic: Avoid Pitfalls
14.
(p. 93)
Customers generally view a new company negatively if it imitates established
companies and practices in the industry.
FALSE
Customers may view a new company as more legitimate if it imitates established
practices in the industry.
AACSB: Analytic
Blooms: Understand
Learning Objective: 04-05 Identify strategies for innovation in your business.
Level of Difficulty: 2 Medium
Topic: Types of Innovations Small Businesses Develop
15.
(p. 93)
Taking an idea and offering a way to do something slightly better than it is done
presently is an imitative strategy.
FALSE
Taking an idea and offering a way to do something slightly better than it is done
presently is referred to as incremental strategy.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-05 Identify strategies for innovation in your business.
Level of Difficulty: 2 Medium
Topic: Types of Innovations Small Businesses Develop
16.
At times of great change, people become more willing to try extreme new ideas.
(p. 93)
TRUE
At times of great change, people become more willing to try extreme new ideas, so it
becomes a great time to introduce extremely innovative ideas.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-05 Identify strategies for innovation in your business.
Level of Difficulty: 1 Easy
Topic: Types of Innovations Small Businesses Develop
17.
The feasibility of an idea is the extent to which it is viable and realistic.
(p. 94)
TRUE
The feasibility of an idea is the extent to which it is viable and realistic.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-06 Describe how to conduct a comprehensive feasibility study for your business ideas.
Level of Difficulty: 1 Easy
Topic: Make Sure an Idea Is Feasible
18. In crafting a feasibility study, the goal is to assess if the idea can be profitably brought
to market.
(p. 94)
TRUE
In crafting a feasibility study, the goal is to assess if the idea can be profitably brought
to market.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-06 Describe how to conduct a comprehensive feasibility study for your business ideas.
Level of Difficulty: 1 Easy
Topic: Make Sure an Idea Is Feasible
19.
(p. 98)
With the many sales and service businesses built using the Internet, a low-cost, lowrisk approach for testing feasibility exists using the concept of a pilot test.
TRUE
With so many sales and service businesses built using the Internet, a low-cost, low risk
approach for testing feasibility exists using the concept of a pilot test.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-07 Discuss the model for pilot testing Internet businesses.
Level of Difficulty: 1 Easy
Topic: Assessing Feasibility by Pilot Testing
20.
(p. 99)
One of the pitfalls small business owners fall into is to fail to build a company culture
that encourages new ideas and embraces change.
TRUE
One of the pitfalls small business owners can fall into is to fail to build a company
culture—a way of thinking and behaving—that encourages new ideas and embraces
change.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-08 Recognize the value of building a creative culture in your business.
Level of Difficulty: 1 Easy
Topic: Ways to Keep On Being Creative
Multiple Choice Questions
21. _____ refers to searching and capturing new ideas that lead to business opportunities.
(p. 82)
A. Opportunity charging
B. Entrepreneurial alertness
C. Opportunity recognition
D. Opportunity encryption
Opportunity recognition refers to searching and capturing new ideas that lead to
business opportunities.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
22.
(p. 82)
Researchers in the field of entrepreneurship and small business believe that _____
behavior is the most basic and important entrepreneurial behavior.
A. opportunity recognition
B. idea networking
C. observational
D. question-seeking
Researchers in the field of entrepreneurship and small business believe that
opportunity recognition behavior is the most basic and important entrepreneurial
behavior.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
23.
(p. 82)
_____ is a special set of observational and thinking skills that help entrepreneurs
identify good opportunities.
A. Screening ability
B. Incremental skill
C. Radical ability
D. Entrepreneurial alertness
Entrepreneurial alertness is the special set of observational and thinking skills that help
entrepreneurs identify good opportunities; the ability to notice things that have been
overlooked, without actually launching a formal search for opportunities, and the
motivation to look for opportunities.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
24.
Which of the following is true of entrepreneurial alertness?
(p. 82)
A. It allows entrepreneurs to launch a formal search for opportunities.
B. It allows entrepreneurs to notice things that have been overlooked.
C. It gives entrepreneurs the experience required to start a small business.
D. It is an approach that allows entrepreneurs to do more or less what others do.
Entrepreneurial alertness is the special set of observational and thinking skills that help
entrepreneurs identify good opportunities; the ability to notice things that have been
overlooked, without actually launching a formal search for opportunities, and the
motivation to look for opportunities.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
25. Josh, an electronics retailer, noticed that the e-commerce business was booming. He
started an online shopping Web site to take advantage of this surge in business. As a
result, his business attracted more customers from all across the country. This reflects
Josh's:
(p. 82)
A. creativity.
B. radical ability.
C. incremental skill.
D. entrepreneurial alertness.
Entrepreneurial alertness is the ability to notice things that have been overlooked,
without actually launching a formal search for opportunities, and the motivation to look
for opportunities.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 2 Medium
Topic: The Source of Business Ideas
26.
(p. 83)
According to the Panel Study of Entrepreneurial Dynamics (PSED), a majority of
entrepreneurs indicated that:
A. the decision to start a business came first.
B. the business idea came first.
C. the idea and decision were simultaneous.
D. starting a business is a loss-making proposition.
In the nationwide Panel Study of Entrepreneurial Dynamics, a sample of 480
entrepreneurs were asked whether the business idea or the decision to start some kind
of business came first. The study revealed that 42 percent of entrepreneurs said that
the "decision to start a business" came first.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
27.
(p. 83)
Working for a very large organization in the tractor manufacturing industry, John
always heard complaints from customers about the parts and services aspects of the
business. Taking an early retirement, John started his own business to specifically
address the many customer complaints he had been hearing. Which of the following is
most likely to be the factor that led John to the business idea?
A. A similar business
B. Chance happening
C. Work experience
D. Technology transfer
Many successful business owners spent years working for a company and gained
valuable experience about how things might be done differently. Sometimes, the idea
grows out of listening to customer complaints.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 3 Hard
Topic: The Source of Business Ideas
28.
RecycleAll Inc. is a company in Memphis, Tennessee, which recycles all the
waste in the city. Being a staunch environmentalist, Francine, a resident
of Memphis, started up a small business that had tie-ups with all the schools and
colleges in the city to spread awareness on the importance of recycling. Which of the
following factors most likely led Francine to her business idea?
(p. 83)biodegradable
A. A similar business
B. A hobby
C. An education
D. A chance happening
Even if people don't have years of work experience in an industry or market, they might
see a business in an area that intrigues them because they like certain products, or
they learn that there is a growing market for this business and they think of a way to
expand on the opportunity.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 3 Hard
Topic: The Source of Business Ideas
29.Emily likes travelling, but every time she checks for tickets and a decent hotel, she gets
overwhelmed with the amount of information she gets. She wants people to have a
hassle-free travel experience. As a result, she starts a small business that filters
information based on people's requirements and provides them with just the right
amount of information they need about the place they are travelling to, the best
(p. 83)
available hotel, and the cheapest air fares. Which of the following is most likely to be
the source of Emily's business idea?
A. A chance happening
B. A personal interest
C. A similar business
D. An expertise
Many people find a way to turn their hobbies and personal interests into successful
businesses.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 3 Hard
Topic: The Source of Business Ideas
30. When people find a way to turn their hobbies into successful businesses, which of the
following is most likely to be the source of their business idea?
(p. 83)
A. Family and friends
B. Education and expertise
C. Serendipity
D. Personal interest
Many people find a way to turn their hobbies or personal interests into successful
businesses.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
31.
(p. 84)
When a person happens to be at the right place at the right time resulting in a
successful business idea, which of the following would be considered to be the factor
that led to the business idea?
A. Family and friends
B. Education and expertise
C. Serendipity
D. Personal interest
Whether people think of it as being in the right place at the right time, as luck, or as
being observant to the cues around them, many businesses have been formed as a
result of the unexpected.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
32.
(p. 84)
Born and raised in India, Rashmi has always enjoyed Indian cooking. As a matter of
fact, cooking was her passion and she always enjoyed reading, learning, and
experimenting with different ethnic cuisines. Ever since Rashmi's family moved to the
United States, she was constantly encouraged by her relatives to start a business
related to cooking. Realizing that her American friends may not be able to handle or
like Indian food due its spiciness, Rashmi decided to make changes to the recipes to
suit the local taste. Rashmi is seriously contemplating whether she should start a
catering business—Tastes of India. Which of the following factors has encouraged
Rashmi to consider the catering business idea?
A. A similar business
B. Serendipity
C. Work experience
D. Family and friends
Ideas can come to prospective entrepreneurs through their conversations with their
family and friends.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
33. Many owners of consulting companies took their own skills and launched businesses
by selling those skills to other companies or individuals who needed them. This is an
example of which of the following sources of business ideas?
(p. 84)
A. Family and friends
B. Serendipity
C. Education and expertise
D. Personal interest
Some small business owners decide first that they want to own a business and then go
about searching for a viable idea for that business. Often, would-be entrepreneurs look
to their own skills and talents for business ideas.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
34.
(p. 85)
According to a majority of entrepreneurs in the Panel Study of Entrepreneurial
Dynamics (PSED), which of the following is the most frequently mentioned source of
business ideas?
A. Discussion with potential investors
B. Education and expertise
C. Family and friends
D. Work experience
In the Panel Study of Entrepreneurial Dynamics, work experience in a particular
industry or market was the most frequently mentioned source of ideas.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
35.
One powerful but rarely used source of business ideas are:
(p. 85)
A. family and friends.
B. work experiences.
C. existing customers.
D. government agencies.
One powerful but rarely used source of ideas are universities and government
agencies. Both develop a tremendous range of new technologies or refinements of
existing technologies, but never do anything with them.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
36.
(p. 85)
A _____ is a legal agreement that grants the rights to use a particular piece of
intellectual property.
A. codicil
B. franchise
C. writ
D. license
A license is a legal agreement granting you rights to use a particular piece of
intellectual property.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
37.
(p. 85)
The firm that obtains the rights to use a particular piece of intellectual property is
referred to as the:
A. franchisee.
B. licensee.
C. obligor.
D. assignor.
A license is a legal agreement granting you rights to use a particular piece of
intellectual property. In return, the licensee is required to pay the owner of the license
(the licensor).
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
38.
(p. 85)
A person or organization offering the rights to use a particular piece of intellectual
property is referred to as the:
A. bailor.
B. franchisor.
C. licensor.
D. licensee.
A license is a legal agreement granting you rights to use a particular piece of
intellectual property. In return, the licensee is required to pay the owner of the license
(the licensor).
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
39. _____ is a payment to a licensor based on the number or value of licensed items sold.
(p. 85)
A. Milestone payment
B. Lump sum payment
C. Royalty
D. Pay-off
A royalty is a payment to a licensor based on the number or value of licensed items
sold.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 1 Easy
Topic: The Source of Business Ideas
40.
(p. 85)
Adam owns a software development company. He and his team developed and
licensed new software that could help many organizations strengthen their Web
security. Any organization that wishes to use Adam's licensed software would most
likely have to pay him in the form of a(n) _____.
A. pay-off
B. royalty
C. lump sum payment
D. payout
A royalty is a payment to a licensor based on the number or value of licensed items
sold.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 04-01 Recognize the sources of opportunity entrepreneurs draw on to get business ideas.
Level of Difficulty: 2 Medium
Topic: The Source of Business Ideas
41.
(p. 87)
Which of the following questions in a typical I2P analysis provides a simple and
nontechnical description of the product?
A. How is your product better than your competitor's?
B. What is your product or idea?
C. Why will customers buy your product?
D. What is the market and its size for your product?
Of all the questions in a typical I2P analysis, the question "What is your product or
idea?" asks for a nontechnical description of the concept simple enough for everyone
to understand it.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-02 Identify the way ideas are evaluated for business potential.
Level of Difficulty: 1 Easy
Topic: Screening Ideas
42.
(p. 87)
According to the I2P approach to organizing an opportunity screen, which of the
following aspect provides information about the specific individuals, groups, or
organizations that entrepreneurs approach first to buy their product or service?
A. The initial set of customers
B. The value-creation for customers
C. The market and its size
D. The extent of IP protection for the product or service
In an I2P analysis, the question "How would you define the best initial set of
customers?" looks at the specific individuals, groups, or organizations you would
approach first to buy your product or service.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-02 Identify the way ideas are evaluated for business potential.
Level of Difficulty: 1 Easy
Topic: Screening Ideas
43.
As a part of her I2P analysis, Amanda conducted a survey in which she asked her
consumers about their interests. She did the survey to match market demand
to a new product idea she has. Amanda addresses which of the following aspects of
the I2P analysis?
(p. 87) potential
A. The novelty of the product
B. The extent of IP protection for the idea
C. The reasons for customers to buy the product
D. The royalty that the product is likely to generate
According to the I2P analysis, it is important to know about potential customers'
interests to understand the reason why they will buy a product.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 04-02 Identify the way ideas are evaluated for business potential.
Level of Difficulty: 3 Hard
Topic: Screening Ideas
44. Gabriel has a product idea of a device which he believes will help people manage their
daily chores, hence making their lives easier. The description of the product is most
likely to address which aspect of the I2P analysis?
(p. 87)
A. The extent of IP protection for the idea
B. The novelty of the product
C. The royalty that the product is likely to generate
D. The value add for customers
According to the I2P analysis, great products or services create additional value for
customers, helping them get more out of work or life, or making life easier, or helping
them meet other goals.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 04-02 Identify the way ideas are evaluated for business potential.
Level of Difficulty: 3 Hard
Topic: Screening Ideas
45. Sandra has a product idea. She has researched about all the competing products and
the companies that produce them. The research helps Sandra to address which of the
following aspects of the I2P analysis?
(p. 87)
A. The market and its size
B. The extent of IP protection for the idea
C. The initial set of customers
D. The royalty that the product is likely to generate
Where there are competing products in a particular market, entrepreneurs can get an
idea of the market size.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 04-02 Identify the way ideas are evaluated for business potential.
Level of Difficulty: 3 Hard
Topic: Screening Ideas
46.Mark has developed a novel product and is worried that it might get copied. To address
this concern, Mark must address which of the following aspects of the I2P analysis?
(p. 87)
A. The royalty the product is most likely to generate
B. The extent of IP protection for the product
C. The initial set of customers
D. The market and its size
Entrepreneurs must think of a strategy for protecting their idea from competitors with
the help if IP protection. Examples include patents, trademarks, etc.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 04-02 Identify the way ideas are evaluated for business potential.
Level of Difficulty: 3 Hard
Topic: Screening Ideas
47.
(p. 87)
Which of the following questions in a typical I2P analysis provides information on
competing products?
A. How would you define the best initial set of customers?
B. What is your product or idea?
C. Can you develop IP protection for your idea?
D. What is the market and its size?
This questions tries to answer where there are competing products, you can get an
idea of the market size. While precise numbers are unlikely at this point, you need to
have some idea if we are talking about a market of hundreds, thousands, or millions.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-02 Identify the way ideas are evaluated for business potential.
Level of Difficulty: 1 Easy
Topic: Screening Ideas
48.
(p. 87)
Which of the following questions in a typical I2P analysis looks at the specific
individuals, groups, or organizations you would approach first to buy your product or
service?
A. How is your product or idea better?
B. Who will buy it?
C. Why will they buy it?
D. What is the market and its size?
The "Who will buy it?" question looks at the specific individuals, groups, or
organizations you would approach first to buy your product or service.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-02 Identify the way ideas are evaluated for business potential.
Level of Difficulty: 1 Easy
Topic: Screening Ideas
49.
The SCAMPER tool is based on the work of:
(p. 89)
A. David McClelland.
B. Abraham Maslow.
C. Alex Osborne.
D. Frederick Herzberg.
The SCAMPER tool is based on the work of Alex Osborne.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
50.
(p. 89)
_____ is a process of producing an idea or opportunity that is novel and useful,
frequently derived from making connections among distinct ideas or opportunities.
A. Prototyping
B. Creativity
C. Benchmarking
D. Incubation
Creativity is a process of producing an idea or opportunity that is novel and useful,
frequently derived from making connections among distinct ideas or opportunities.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
51.
In the SCAMPER tool, "S" stands for:
(p. 89)
A. strategize.
B. substitute.
C. submit.
D. solicit.
In the SCAMPER tool, "S" stands for substitute.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
52. According to the SCAMPER tool, a feature that allows customers to order directly from
a Web site rather than visiting a store is an example of:
(p. 89)
A. elimination.
B. adaptation.
C. magnification.
D. substitution.
A feature that allows your customers to order directly from a Web site rather than
visiting your store or ordering by mail is an example of substitution.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
53.
Which of the following is the idea trigger for the "substitute" cue of the SCAMPER
tool?
(p. 89)
A. The opportunities that come as a result of replacing something that already exists
B.
The separate products, services, or whole businesses that can be put together to
create another distinct business
C. The products or services that can be imitated from other industries or fields
D.
The factor that can be used to make a product different from that of competitors'
products
The opportunities that come as a result of replacing something that already exists is
the idea trigger for the substitute cue of the SCAMPER tool.
AACSB: Analytic
Blooms: Understand
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 2 Medium
Topic: From Ideas to Opportunities through Creativity
54. When a bookstore starts to sell videos, music, and coffee as well, it uses which of the
following elements of the SCAMPER tool?
(p. 89)
A. Rearrange
B. Eliminate
C. Combine
D. Substitute
The combine cue of the SCAMPER tool involves making possible combinations to
make something entirely different.
AACSB: Analytic
Blooms: Understand
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 2 Medium
Topic: From Ideas to Opportunities through Creativity
55.
(p. 90)
The idea trigger of the separate products, services, or whole businesses that
entrepreneurs can put together to create another distinct business represents which
cue of the SCAMPER tool?
A. Substitute
B. Magnify
C. Adapt
D. Combine
The idea trigger of the separate products, services, or whole businesses that
entrepreneurs can put together to create another distinct business represents the
combine cue of the SCAMPER tool.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 2 Medium
Topic: From Ideas to Opportunities through Creativity
56.
(p. 90)
According to the SCAMPER tool, which popular innovation strategy can be just as
effective and much more likely in the real world than business opportunities that result
from radical innovations?
A. Magnify
B. Adapt
C. Eliminate
D. Restitute
According to the SCAMPER tool, adapting is a popular innovation strategy that can be
just as effective, and much more likely in the real world, than business opportunities
that are the result of radical innovations such as inventions.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
57.
Rejecting existing ideas, and presenting a way to do things differently refers to the
_____ strategy.
(p. 90)
A. imitative
B. prototyping
C. radical innovation
D. integrative
Radical innovation strategy involves rejecting existing ideas, and presenting a way to
do things differently.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
58.
Which of the following is the idea trigger for the magnify cue of the SCAMPER tool?
(p. 90)
A. The opportunities that come as a result of replacing things that already exist
B.
The separate products, services, or whole businesses that can be put together to
create another distinct business
C. The products or services that can be imitated from other industries or fields
D.
The factor that can be used to make a product different from that of competitors'
products
The idea trigger for the modify or magnify cue is how entrepreneurs can make their
products or services more noticeable or dramatic, or different in some way from their
competitors? It need not be in the product itself, but it could be the way the
entrepreneurs advertise or treat the customer during the transaction that becomes
memorable.
AACSB: Analytic
Blooms: Understand
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 2 Medium
Topic: From Ideas to Opportunities through Creativity
59.
(p. 90)
If entrepreneurs realize that all the traditional applications for their products have
disappeared and that they have surplus products, which of the following elements of
the SCAMPER tool are they most likely to employ?
A. Sectionalize
B. Put to other uses
C. Eliminate
D. Restitute
According to the SCAMPER tool, if entrepreneurs realize that all the traditional uses for
their products have disappeared and that they have trailer truckloads out back with
tons of products, they are most likely to put their products to other uses.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
60.
In the SCAMPER tool, "M" stands for:
(p. 90)
A. manage.
B. match.
C. market.
D. modify.
Taking an existing product and changing its appearance or adding more features or
making its advertising more dramatic are some ways of magnifying or modifying an
idea.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
61.
(p. 90)
Born and raised in India, Rashmi has always enjoyed Indian cooking. As a matter of
fact, cooking was her passion and she always enjoyed reading, learning, and
experimenting with different ethnic cuisines. Ever since Rashmi's family moved to the
United States, her cousins, friends, and other people at dinner gatherings have always
commented that Rashmi should start a catering business. Realizing that her American
friends may not be able to handle or like the Indian food because of its spiciness,
Rashmi decided to make changes to the recipes to suit the local taste. Rashmi is
seriously contemplating whether she should start a catering business—Tastes of India.
Rashmi appears to be applying which element of the SCAMPER tool in her
entrepreneurship ideas?
A. Modify
B. Substitute
C. Restitute
D. Eliminate
Taking an existing product and changing its appearance or adding more features or
increasing the hours a store is open or making its advertising more dramatic are some
ways a prospective entrepreneur can magnify or modify his or her idea.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 2 Medium
Topic: From Ideas to Opportunities through Creativity
62.
(p. 90)
There is much a small business can do to create memorable images and advertising
for itself, and it does not need expensive television ads to do it. Which element of
SCAMPER is being referred to here?
A. Magnify
B. Saturate
C. Correlate
D. Put to other use
According to the magnify cue of the SCAMPER tool, there is much a small business
can do to create memorable images and advertising for itself, and it does not need
expensive television ads to do it.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
63.
In the SCAMPER tool, "E" stands for:
(p. 90)
A. entertain.
B. eliminate.
C. engineer.
D. extrapolate.
In the SCAMPER tool, "E" stands for eliminate.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
64.
In the SCAMPER tool, "R" stands for:
(p. 90)
A. restitution.
B. resolution.
C. reverse.
D. result.
In the SCAMPER tool, "R" stands for reverse or rearrange.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
65.
(p. 91)
Using paradoxes such as using stimulants to calm hyperactive children, to challenge
old ways of thinking, refers to which of the following cues of the SCAMPER tool?
A. Minimize
B. Saturate
C. Restitute
D. Rearrange
In the SCAMPER tool, rearranging involves using paradox to challenge old ways of
thinking such as using stimulants to calm hyperactive children.
AACSB: Analytic
Blooms: Understand
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 2 Medium
Topic: From Ideas to Opportunities through Creativity
66.
(p. 91)
Which of the following aspects of the SCAMPER tools involves searching for
opportunities that arise when a person gets rid of something or stops doing
something?
A. Adapt
B. Eliminate
C. Rearrange
D. Modify
Elimination involves searching for opportunities that arise when a person gets rid of
something or stops doing something.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
67.
Which of the following is an advantage of the SCAMPER tool?
(p. 91)
A. It helps entrepreneurs to come up with alternative solutions.
B. It helps entrepreneurs to generate more royalty than any other method.
C. It gives IP protection to products and services.
D. It helps entrepreneurs to avoid governmental taxes and liabilities.
SCAMPER is a very effective method for helping business owners and their employees
come up with alternative solutions and opportunities.
AACSB: Analytic
Blooms: Understand
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 2 Medium
Topic: From Ideas to Opportunities through Creativity
68.
Which of the following is true of creative business owners?
(p. 91)
A. They implement an imitative strategy to their business.
B. They do not ask many questions.
C. They question and challenge the way things appear.
D.
They give more importance to the problems they face rather than identifying
opportunities.
Creative business owners question and challenge the way things appear, to see if they
can find a new way of doing things.
AACSB: Analytic
Blooms: Understand
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 2 Medium
Topic: From Ideas to Opportunities through Creativity
69.
Which of the following is most likely to be true of people with highly innovative
businesses?
(p. 91)
A. They implement an imitative strategy to their business.
B. They are persistent about asking questions.
C.
They give more importance to the problems they face rather than identifying
opportunities.
D. They typically are people with political connections.
It is more likely that in a highly innovative business the person or team behind the
business is simply persistent about asking questions.
AACSB: Analytic
Blooms: Understand
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 2 Medium
Topic: From Ideas to Opportunities through Creativity
70.
(p. 91)
According to Graham Wallas' description of the creative process, a creative thought
includes a(n) _____ stage.
A. industry survey
B. elimination
C. combination
D. incubation
The incubation stage of a creative though involves thinking about the problem or
opportunity in a "not-conscious" way.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
71. According to Graham Wallas' description of the creative process, the _____ stage of a
creative thought involves exploring the problem or opportunity in all directions.
(p. 91)
A. illumination
B. incubation
C. preparation
D. verification
The preparation stage involves exploring the problem or opportunity in all directions.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
72.According to Graham Wallas' description of the creative process, which of the following
is true of the incubation stage of a creative thought?
(p. 91)
A. It involves exploring the problem or opportunity in all directions.
B. It involves the flow of ideas.
C. It involves the testing of the idea.
D. It involves putting the problem on the back burner.
Incubation involves thinking about the problem or opportunity in a "not-conscious" way,
putting it on the back burner, so to speak.
AACSB: Analytic
Blooms: Understand
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 2 Medium
Topic: From Ideas to Opportunities through Creativity
73. According to Graham Wallas' description of the creative process, ideas begin to flow in
which of the following stages?
(p. 91)
A. Preparation
B. Illumination
C. Incubation
D. Verification
According to Graham Wallas' description of the creative process, ideas begin to flow in
the illumination stage of the creative process.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 1 Easy
Topic: From Ideas to Opportunities through Creativity
74.
(p. 92)
Which of the following is an entrepreneur most likely to implement to introduce
changeability into a core business?
A. Redesign the work environment
B. Increase the IP protection on the products or services
C. Simply sell the products or services
D. Read journals related to the area of expertise
To build changeability into a core business, entrepreneurs can redesign the work
environment.
AACSB: Analytic
Blooms: Understand
Learning Objective: 04-03 Understand how creativity methods can help business owners recognize new
opportunities.
Level of Difficulty: 2 Medium
Topic: Getting into an Innovative Frame of Mind
75.In an attempt to become more innovative, a major pitfall that business owners are most
likely to become victim to is:
(p. 92)
A. judging ideas slowly.
B. asking for support after failing the first time.
C. obeying all the rules to get investors.
D. using the first good idea as a business opportunity.
The first good idea is rarely the best. Stopping with the first good idea is one of the five
major pitfalls that business owners become victim to when trying to become more
innovative.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-04 Understand the five pitfalls that hinder innovation.
Level of Difficulty: 1 Easy
Topic: Avoid Pitfalls
76.
(p. 93)
If a business owner assumes that he or she needs to do all the work, make all the
sales calls, and solve everybody's problems, which major pitfall is the business owner
becoming a victim to while trying to become more innovative?
A. Obeying rules that do not exist
B. Judging ideas too quickly
C. Identifying the wrong problem
D. Failing to ask for support
Obeying rules that do not exist is a major pitfall that a business owner can be victim to
if he or she tries to do everything while trying to become more innovative.
AACSB: Analytic
Blooms: Understand
Learning Objective: 04-04 Understand the five pitfalls that hinder innovation.
Level of Difficulty: 2 Medium
Topic: Avoid Pitfalls
77. An overall strategic approach in which the entrepreneur does more or less what others
(p. 93)
are already doing refers to a(n):
A. imitative strategy.
B. innovative strategy.
C. incremental strategy.
D. radical innovation strategy.
An imitative strategy is an overall strategic approach in which the entrepreneur does
more or less what others are already doing.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-05 Identify strategies for innovation in your business.
Level of Difficulty: 1 Easy
Topic: Types of Innovations Small Businesses Develop
78. _____ requires an entrepreneur to assess whether the situation faced is one that is the
same as it has been traditionally or if it is changing.
(p. 93)
A. Business process modeling
B. Opportunity identification process
C. Pilot test
D. Radical innovation strategy
Gaglio and Katz offer a model for thinking about the business implications of
opportunities. Called the opportunity identification process, it has the entrepreneur
assess whether the situation faced is one that is the same as it has been traditionally
or if it is changing.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-05 Identify strategies for innovation in your business.
Level of Difficulty: 1 Easy
Topic: Types of Innovations Small Businesses Develop
79.
(p. 93)
Taking an idea and offering a way to do something slightly better than it is done
presently refers to a(n):
A. imitative strategy.
B. incremental strategy.
C. status quo strategy.
D. innovative strategy.
An incremental strategy involves taking an idea and offering a way to do something
slightly better than it is done presently.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-05 Identify strategies for innovation in your business.
Level of Difficulty: 1 Easy
Topic: Types of Innovations Small Businesses Develop
80. _____ means the extent to which an idea is viable and realistic, and the extent to which
you are aware of internal and external forces that could affect your business.
(p. 94)
A. Flexibility
B. Consistency
C. Feasibility
D. Innovation
Feasibility is extent to which an idea is viable and realistic and the extent to which you
are aware of internal (to your business) and external (industry, market, and regulatory
environment) forces that could affect your business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-06 Describe how to conduct a comprehensive feasibility study for your business ideas.
Level of Difficulty: 1 Easy
Topic: Make Sure an Idea Is Feasible
81. According the study of what matters most to entrepreneurs and their businesses, startup entrepreneurs feel most confident about which of the following aspects?
(p. 94)
A. Complying with local/state/federal regulations
B. Obtaining start-up capital
C. Obtaining a bank's help
D. Attracting employees
According the study of what matters most to entrepreneurs and their businesses, startup entrepreneurs feel most confident about complying with local/state/federal
regulations.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-06 Describe how to conduct a comprehensive feasibility study for your business ideas.
Level of Difficulty: 1 Easy
Topic: Make Sure an Idea Is Feasible
82.
The goal of a feasibility study is:
(p. 94)
A. to create additional value for customers through great products or services.
B. to create outlets for employees to bring out new ideas.
C. to assess if a business idea can be profitably brought to market.
D.
to assess how well a preliminary run of a business works and what problems it
might have.
In crafting a feasibility study, the goal is to assess if a business idea can be profitably
brought to market.
AACSB: Analytic
Blooms: Understand
Learning Objective: 04-06 Describe how to conduct a comprehensive feasibility study for your business ideas.
Level of Difficulty: 2 Medium
Topic: Make Sure an Idea Is Feasible
83.
Which of the following is a traditional problem facing new ideas?
(p. 94)
A. The product or service appeals to a market larger then the entrepreneur expected.
B. The idea cannot be economically made into a product or service.
C. There are too many people involved in making the idea into a business.
D. The local/state federal regulations are too strict to follow.
One of the traditional problems facing new ideas is that an idea cannot be
economically made into a product or service.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-06 Describe how to conduct a comprehensive feasibility study for your business ideas.
Level of Difficulty: 2 Medium
Topic: Make Sure an Idea Is Feasible
84.
(p. 95)
The business idea component of the feasibility study includes which of the following
aspects?
A. Stage of development
B. Competition
C. Market penetration
D. Description of the entrepreneurs
Unique features of the business idea component of the feasibility study include the
description of the entrepreneurs, their firm, and their fit.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-06 Describe how to conduct a comprehensive feasibility study for your business ideas.
Level of Difficulty: 1 Easy
Topic: Make Sure an Idea Is Feasible
85.
(p. 95)
The product/service component of the feasibility study typically includes which of the
following aspects?
A. Stage of development
B. Competition
C. Market penetration
D. Cost forecast
The product/service component of the feasibility study includes: benefits and limitations
of the unique features, stage of development, and legal restrictions and rights.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-06 Describe how to conduct a comprehensive feasibility study for your business ideas.
Level of Difficulty: 1 Easy
Topic: Make Sure an Idea Is Feasible
86. The industry and market component of the feasibility study typically includes which of
the following components?
(p. 96)
A. Sales revenue forecast
B. The competition
C. Writing a business plan
D. Writing a mission statement
The industry and market component of the feasibility study typically includes current
industry, market potential for this industry, the competition, and your customers.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-06 Describe how to conduct a comprehensive feasibility study for your business ideas.
Level of Difficulty: 2 Medium
Topic: Make Sure an Idea Is Feasible
87.The future action plan component of the feasibility study includes which of the following
elements?
(p. 98)
A. Profitability
B. The competition
C. Legal restrictions and rights
D. Writing a business plan
The feasibility analysis helps entrepreneurs get started with writing their business plan.
They will have the information they need to address the competitive advantages and
disadvantages of their business and the strategies they will use to meet their goals.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-06 Describe how to conduct a comprehensive feasibility study for your business ideas.
Level of Difficulty: 2 Medium
Topic: Make Sure an Idea Is Feasible
88. _____ refers to a preliminary run of a business, sales effort, program, or Web site with
the goal of assessing how well the overall approach works and what problems it might
have.
(p. 98)
A. Conversion rate
B. Pilot test
C. Incubation period
D. Commercialization
Pilot test is a preliminary run of a business, sales effort, program, or Web site with the
goal of assessing how well the overall approach works and what problems it might
have.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-07 Discuss the model for pilot testing Internet businesses.
Level of Difficulty: 1 Easy
Topic: Assessing Feasibility by Pilot Testing
89.
(p. 98)
The measure of how many visitors to a Web site actually make a purchase is known
as:
A. illumination rate.
B. frame rate.
C. conversion rate.
D. pilot test.
Conversion rate is the measure of how many visitors to a Web site (or people who click
on an online advertisement) actually make a purchase.
AACSB: Analytic
Blooms: Remember
Learning Objective: 04-07 Discuss the model for pilot testing Internet businesses.
Level of Difficulty: 1 Easy
Topic: Assessing Feasibility by Pilot Testing
90.
The strategy for using the pilot test approach is:
(p. 99)
A. to show potential partners that the idea can generate sales.
B. to generate IP protection for the idea.
C. to check the number of visitors to the Web site.
D. to circumvent government regulations.
The strategy for using the pilot test approach is to show potential partners, investors, or
bankers that the idea can generate sales.
Chapter 04 Small Business Entry: Paths to Part-Time
Entrepreneurship
True / False Questions
1.
Part-time self-employment refers to working for self for 50 or fewer hours a week.
(p. 122)
FALSE
Part-time self-employment refers to working for self for 35 or fewer hours a week.
Working part time means that the entrepreneur can do other work, such as have a job
in another company, go to school, or take care of family.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 1 Easy
Topic: Why Part-Time Businesses Are Important
2.
Most entrepreneurs start out working part time on their new business.
(p. 122)
TRUE
Most entrepreneurs start out working part time on their new business. According to the
Panel Study of Entrepreneurial Dynamics (PSED), three-quarters of new businesses
start on a part-time basis.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 1 Easy
Topic: Why Part-Time Businesses Are Important
3.
(p. 123)
When one is new to business and needs to gain basic experience, it makes better
sense to first undertake a part-time business.
TRUE
There are three situations in which it might make better sense to first undertake a parttime business. One of these is when one is new to business and needs to gain basic
experience.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 1 Easy
Topic: When to Consider Part-Time Entrepreneurship
4. The more time and energy one spends preparing for a small-scale part-time business,
the longer it takes to make a profit.
(p. 124)
TRUE
The more time and energy one spends preparing for a small-scale part-time business,
the longer it takes to make a profit. The good news is that in most cases, the cost to
start-up and the time to market are closely related.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-02 Assess the feasibility of opportunities to enter into a part-time business.
Level of Difficulty: 1 Easy
Topic: Key Considerations for Success in Part-Time Entrepreneurship
5.
(p. 125)
Covenants are government specifications for acceptable use of land and buildings in
particular areas.
FALSE
The limitations imposed on one's property by his or her neighborhood group are known
as covenants.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
6.
(p. 129)
Most small businesses—even part-time ones—need to have a website regardless of
whether or not they use it for actual sales.
TRUE
Most small businesses—even part-time ones—need to have a website regardless of
whether or not they use it for actual sales. First of all, potential customers will use it to
find the business. Second, if they've heard about the business from something other
than the Internet, they will use the site to find out more information about the business
and to decide if they want to actually contact the business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
7.
An advantage of home businesses is the highly variable income that it produces.
(p. 138)
FALSE
The disadvantages of home businesses come from always working "on the road,"
lacking a base from which one can organize and work, having a highly variable income,
and finding ways for customers to get in touch with the person concerned(although cell
phones and e-mail have made a major difference).
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
8.
(p. 139)
Primary disadvantages of stand retailing are that it requires a significant amount of
capital and time investment.
FALSE
The advantage of stand businesses is that one can start with little investment. Stands
can be a box or ground cloth. They also do not require a lot of investment in inventory.
There are a variety of locations where a stand can be set up, such as flea markets.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
9.
(p. 141)
Intellectual property refers to original works like inventions, visual and performing art
works, books, and computer programs.
TRUE
Intellectual property (often abbreviated IP) refers to original works like inventions,
visual and performing art works, books, and computer programs.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
10. The advantage of consignment approaches is that they permit full-time sales with only
a part-time involvement from the owner.
(p. 141)
TRUE
The advantage of consignment approaches is that they permit full-time sales with only
a part-time involvement from the owner, low setup cost, a low risk level, and the
flexibility that comes from the variety of consignment agents and agencies available.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
11.
The majority of part-time businesses are based in the home.
(p. 143)
TRUE
The majority of part-time businesses are based in the home. The business takes
space, uses resources the family also uses, and generally places stress on the
household. Keeping a clean boundary, like an area known as the "business corner,"
helps make sure that family and business are protected from each other.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-04 Use the BRIE model to describe what it takes to be successful in part-time
entrepreneurship.
Level of Difficulty: 1 Easy
Topic: Success Factors for Part-Time Businesses
12.
(p. 143)
There are two key groups outside one's business with which one must
deal—customers and investors.
FALSE
There are two key groups outside an owner's business with whom the owner must
deal—government and customers. Even part-time businesses have to deal with
government, and three issues pop up repeatedly: registration or licensing, taxes, and
zoning.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-04 Use the BRIE model to describe what it takes to be successful in part-time
entrepreneurship.
Level of Difficulty: 1 Easy
Topic: Success Factors for Part-Time Businesses
13.
Pricing is not seen as a challenge by part-time businesses.
(p. 143)
FALSE
Pricing is also often seen as a challenge by part-time businesses. Even if the business
is part time, that does not mean the prices have to be cut-rate. One good way to get an
idea of realistic pricing is to price competitors' offerings.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-04 Use the BRIE model to describe what it takes to be successful in part-time
entrepreneurship.
Level of Difficulty: 1 Easy
Topic: Success Factors for Part-Time Businesses
14.
Outsourcing refers to the assignment of work to others over whom one has power.
(p. 144)
FALSE
Outsourcing is contracting with people or companies outside one's business to do work
for his or her business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-05 Describe the advantages and pitfalls of delegating and outsourcing.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
15.
(p. 146)
One technique to making bootstrapping work is leveraging low costs with free
expertise.
TRUE
One technique to making bootstrapping work is leveraging low costs with free
expertise. One way to do this is to set up an advisory board.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-06 Explain the benefits of bootstrapping methods for entrepreneurs.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
16.
Moonlighting refers to working on one's own part-time job after one's regular job.
(p. 146)
TRUE
Moonlighting is working on one's own part-time job after one's regular job.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-07 Describe the ethical challenges of part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
17. Cannibalizing occurs when people do work for their part-time business while they are
at their full-time job, blurring the boundary between them.
(p. 148)
FALSE
Cannibalizing means taking business away from one's employer.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-07 Describe the ethical challenges of part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
18.
Aggrandizing refers to taking business away from your employer.
(p. 148)
FALSE
Aggrandizing is attempting to make one's business or self seem more accomplished or
grander than reality.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-07 Describe the ethical challenges of part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
19. In deciding whether to make the move from part-time to full time entrepreneurship, the
key question is usually government regulations.
(p. 148)
FALSE
In deciding whether to make the move from part-time to full time entrepreneurship, the
key question is usually financial.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-08 Describe the challenges of moving from part-time to full-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
20.
(p. 149)
One of the ways to determine the financial situation of a business is by crafting a
business plan.
TRUE
The way to determine the financial situation of a business is through crafting a
business plan. Having a business plan helps the owner work out all the major details of
the business and how he or she plans to organize it as he or she is growing it.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-08 Describe the challenges of moving from part-time to full-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
Multiple Choice Questions
21.
_____ refers to working for self for 35 or fewer hours a week.
(p. 122)
A. Franchising
B. Full-time self-employment
C. Aggrandizing
D. Part-time self-employment
Part-time self-employment refers to working for self for 35 or fewer hours a week.
Working part time means that the entrepreneur can do other work, such as have a job
in another company, go to school, or take care of family.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 1 Easy
Topic: Why Part-Time Businesses Are Important
22.
Which of the following is an example of part-time self-employment?
(p. 122)
A. Tabatha, who works from home for a fashion website for a minimum of 40 hours a
week
B. Raul, who works as an intern in a law firm for more than 35 hours a week
C. Dorothy, who works in her small bakery for less than 30 hours a week
D. Joshua, who teaches piano to children for 40 hours a week
Part-time self-employment refers to working for self for 35 or fewer hours a week.
Working part time means that the entrepreneur can do other work, such as have a job
in another company, go to school, or take care of family.
AACSB: Analytic
Blooms: Apply
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 2 Medium
Topic: Why Part-Time Businesses Are Important
23.
_____ comprises of working for self for more than 35 hours a week.
(p. 122)
A. Franchising
B. Full-time self-employment
C. Aggrandizing
D. Part-time self-employment
For people working more than 35 hours a week, the term is full-time self-employment.
Working full time means that the majority of one's time is spent on the business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 1 Easy
Topic: Why Part-Time Businesses Are Important
24.
Which of the following is an example of full-time self-employment?
(p. 122)
A. Angela, who works as a columnist in a local newspaper for 30 hours a week
B. Brandon, who works as an intern in a law firm for less than 35 hours a week
C. Peggy, who has a business of personalized gifts, works for a minimum of 40 hours
a week
D. Joey, who is a food critic, works only 14 hours a week
For people working more than 35 hours a week, the term is full-time self-employment.
Working full time means that the majority of one's time is spent on the business.
AACSB: Analytic
Blooms: Apply
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 2 Medium
Topic: Why Part-Time Businesses Are Important
25.
Which of the following requires a full-time approach to self-employment?
(p. 122)
A. Free lancing
B. Stand retailing
C. Franchising
D. Interning
When one enters a business, one makes a choice about pursuing a full-time or parttime approach. Full-time approaches include buying or inheriting existing businesses,
franchising, or opening a new full-time business.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 2 Medium
Topic: Why Part-Time Businesses Are Important
26.
Which of the following is true about part-time self-employment?
(p. 122)
A. It is only a minor portion of all current entrepreneurship in the United States.
B. There is no volatility in part-time self-employment.
C. It accounts for only 10 percent of small businesses in the United States.
D. Most entrepreneurs start out working part time on their new business.
Most entrepreneurs start out working part time on their new business. According to the
Panel Study of Entrepreneurial Dynamics (PSED), three-quarters of new businesses
start on a part-time basis. The ease and low cost of entry and exit make part-time
entrepreneurship a great way to try a variety of different businesses without "betting the
farm" each time they start a business.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 2 Medium
Topic: Why Part-Time Businesses Are Important
27.
(p. 122)
Which of the following is a reason why more new businesses start on a part-time
basis?
A. The cost of entry and exit is low.
B. There is lack of volatility.
C. There is a broad window of opportunity.
D. The part-time workforce is very small.
Most entrepreneurs start out working part time on their new business. According to the
Panel Study of Entrepreneurial Dynamics (PSED), three-quarters of new businesses
start on a part-time basis. The ease and low cost of entry and exit make part-time
entrepreneurship a great way to try a variety of different businesses without "betting the
farm" each time they start a business.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 2 Medium
Topic: Why Part-Time Businesses Are Important
28.
The frequency of business starts and stops is referred to as:
(p. 122)
A. volatility.
B. aggrandizing.
C. bootstrapping.
D. adaptability.
The frequency of business starts and stops is referred to as volatility. Many people
jump into and out of self-employment (a change called volatility by economists) for a
few weeks at a time, perhaps because they do project-based work like taking on a
single consulting project in their spare time, or doing someone's taxes, or selling an
item or two on eBay or at a garage sale.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 1 Easy
Topic: Why Part-Time Businesses Are Important
29.
(p. 122)
Andrew initially worked with a travel website for few months and then became selfemployed by starting a martial arts school, where he taught karate to teenagers. After
an year, he closed the school and joined an advertising firm. After two years, he quit
the advertising firm and became self-employed as a freelance music composer. Which
of the following terms indicates the changes in Andrew's employment structure?
A. Volatility
B. Adverse possession
C. Bootstrapping
D. Easement
The frequency of business starts and stops is referred to as volatility. Many people
jump into and out of self-employment (a change called volatility by economists) for a
few weeks at a time, perhaps because they do project-based work like taking on a
single consulting project in their spare time, or doing someone's taxes, or selling an
item or two on eBay or at a garage sale.
AACSB: Analytic
Blooms: Apply
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 2 Medium
Topic: Why Part-Time Businesses Are Important
30. For new entrepreneurs, which of the following would be a good reason to undertake a
part-time business first before a full-time one?
(p. 123)
A. To buy an existing business
B. To gain basic experience
C. To open a franchise
D. To increase competition in a specific industry
One situation in which it might make better sense to undertake a part-time business
first is when someone is new to business and needs to gain basic experience.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 2 Medium
Topic: When to Consider Part-Time Entrepreneurship
31. Which of the following situations indicates that it makes better sense to first undertake
a part-time business?
(p. 123)
A. Byron has a full-time business plan.
B. Jamie wants to start a franchise for an international brand.
C. Cathy has funds to start her own music school.
D. Damon wants to gain experience in the advertising industry.
There are three situations in which it might make better sense to first undertake a parttime business. One of these is when you are new to business and need to gain basic
experience. A second type of situation is one in which you lack resources to pursue a
full-scale business or create a business plan. The third type of situation is a narrow
window of opportunity.
AACSB: Analytic
Blooms: Apply
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 2 Medium
Topic: When to Consider Part-Time Entrepreneurship
32.
(p. 123)
All of the following are situations in which it might make better sense to undertake a
part-time business EXCEPT:
A. when someone is new to business and needs to gain basic experience.
B. when someone lacks resources to pursue a full-scale business.
C. when there is a narrow window of opportunity.
D. when there is too much competition.
A situation in which it might make better sense to undertake a part-time business first is
one in which if one lacks resources to pursue a full-scale business or create a business
plan. Time is probably the ultimate resource, and starting a business can tax it heavily.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-01 Describe when and why part-time entrepreneurship makes sense.
Level of Difficulty: 2 Medium
Topic: When to Consider Part-Time Entrepreneurship
33.
_____ refers to the impression of a long-term continuity a business gives others.
(p. 123)
A. Intermittence
B. Variance
C. Passé
D. Permanence
Permanence is the impression of a long-term continuity a business gives others. It is a
key consideration for part-time small business start-ups. Permanence is related to the
concept of legitimacy.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-02 Assess the feasibility of opportunities to enter into a part-time business.
Level of Difficulty: 1 Easy
Topic: Key Considerations for Success in Part-Time Entrepreneurship
34.
(p. 125)
Which of the following is true with regard to home-based businesses in the United
States?
A.
Home-based businesses are specific only to making furniture, toys, clothing, or
food.
B. Home-based businesses give U.S. customers the strongest sense of legitimacy.
C. Home-based businesses in the United States represent only 5 percent of all firms.
D. Home-based businesses are inexpensive and quick to start.
There were about 14.4 million home-based businesses in the United States in 2007,
and they represented 52 percent of all firms. The reason for these large numbers is
because the home-based business meets at least two of the three criteria for start-up.
It is inexpensive, since you are already living somewhere and you can quickly get your
business going where you live.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 2 Medium
Topic: What Kinds of Part-Time Entrepreneurship Exist?
35.All of the following are reasons for the large numbers of home-based businesses in the
United States EXCEPT that:
(p. 125)
A. the idea that a customer knows where the entrepreneur lives can be a point in favor
of trusting in the potential permanence of the firm.
B. it is inexpensive, since the owner's residence is his or her office.
C. they generally give customers the strongest sense of legitimacy.
D. one can get their business going where he or she lives.
Although home-based businesses do not always give customers the strongest sense of
legitimacy, the idea that a customer knows where the entrepreneur lives can be a point
in favor of trusting in the potential permanence of the firm.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 2 Medium
Topic: What Kinds of Part-Time Entrepreneurship Exist?
36.
Which of the following is the greatest problem faced by home-based entrepreneurs?
(p. 125)
A. Zoning challenges
B. Gaining customers
C. Insurance problems
D. Delivering work
According to home-based entrepreneurs, the greatest problems they face come when
there are zoning challenges or family challenges to the business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
37. Government specifications for acceptable use of land and buildings in particular areas
are called:
(p. 125)
A. licensing laws.
B. public utility laws.
C. property laws.
D. zoning laws.
Cities, counties, neighborhoods, apartment complexes, and dorms pass regulations
which limit the ways residents can use or modify their space. The government
restrictions are called zoning laws, while the ones set up by other organizations are
called covenants.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
38. The limitations imposed on a business's property by neighborhood groups are referred
to as:
(p. 125)
A. easements.
B. covenants.
C. volatilities.
D. aggrandizements.
Cities, counties, neighborhoods, apartment complexes, and dorms pass regulations
which limit the ways residents can use or modify their space. The government
restrictions are called zoning laws, while the ones set up by other organizations are
called covenants.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
39. A(n) _____ is a permission from a government organization to act differently than what
the laws state.
(p. 126)
A. covenant
B. easement
C. variance
D. business pass
A variance is a permission from a government organization to act differently than the
laws state.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
40.
Which of the following is an example of e-commerce?
(p. 128)
A. Julia bought handicraft from a local market.
B. Tabatha bought a cell phone in an exchange offer at an exhibition.
C. Arthur bought a pair of jeans from the store next to his house.
D. Christopher got shoes delivered at his home after he ordered for it online.
E-commerce is the use of the Internet to conduct business transactions.
AACSB: Analytic
Blooms: Apply
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 2 Medium
Topic: What Kinds of Part-Time Entrepreneurship Exist?
41.
(p. 128)
An Internet site designed to introduce and explain a business to others is known as
a(n):
A. e-commerce website.
B. portal website.
C. advocacy website.
D. informational website.
The informational website is an important type of website which informs possible
customers about a firm.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
42.When an individual buys products like shoes, music, or cell phones online, it is referred
to as _____ type of e-commerce.
(p. 128)
A. business-to-business (B2B)
B. business-to-consumer (B2C)
C. consumer-to-consumer (C2C)
D. business-to-Internet (B2I)
Products like music and cell phones are examples of the kind of goods individuals buy
online. That type of e-commerce is called business-to-consumer (B2C).
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
43.
In _____ sales, one firm sells to another firm.
(p. 128)
A. business-to-business (B2B)
B. business-to-consumer (B2C)
C. consumer-to-consumer (C2C)
D. business-to-Internet (B2I)
In business-to-business transactions, one firm sells to another firm.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
44.
Which of the following is true about business-to-business (B2B) transactions?
(p. 128)
A. For most people, the B2B market is visible and overexposed.
B. An example of a B2B transaction would be an individual buying a cell phone.
C.
B2B involves electronically-facilitated transactions between consumers through a
third party.
D. B2B e-commerce is larger than B2C e-commerce.
For most people, the B2B market is invisible. B2C e-commerce is large, B2B ecommerce is larger.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 2 Medium
Topic: What Kinds of Part-Time Entrepreneurship Exist?
45. A(n) _____ refers to a private individual or household that is the end-user of a product
or service.
(p. 129)
A. producer
B. intermediary
C. consumer
D. beneficiary
A consumer is a private individual or household that is the end-user of (the entity that
"consumes") a product or service.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
46.
Which of the following is true about a hosting package?
(p. 129)
A. It should include at least 1 terabyte of traffic a month for an informational site.
B. It should give at least five web pages of space to tell a story.
C. It should include at least two e-mail accounts using ones domain name.
D.
It should include an online website editor so one can make changes to his or her
site without buying web-authoring software.
A hosting package for an informational site should include at least 1 gigabyte of traffic
a month. It should give you at least 10 web pages of space to tell your story. The
hosting package should also include at least five e-mail accounts using your domain
name.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 2 Medium
Topic: What Kinds of Part-Time Entrepreneurship Exist?
47.
(p. 129)
A web page in which entries are posted in reverse chronological order is a known as
a:
A. blog.
B. variance.
C. search engine.
D. push service.
A blog is a web page in which entries are posted in reverse chronological order (i.e.,
the most recent at the top of the page). Many blogs let readers respond online, so the
entrepreneur and the potential customers can interact directly.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
48.
Which of the following is true about RSS feeds?
(p. 129)
A.
RSS feeds are used by all websites on the Internet to push content out to
customers.
B. RSS feeds sends whatever web material is specified to subscribers to that feed.
C. RSS stands for "really simple sequence."
D. RSS feeds can be read in many browsers but not with special readers.
RSS feed is an Internet messaging service that pushes (sends) whatever web material
you specify to subscribers to that feed. Today website packages include the ability to
push content, like your blog, out to customers who register at your site. Some sites do
this by using an RSS feed.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 2 Medium
Topic: What Kinds of Part-Time Entrepreneurship Exist?
49.
(p. 130)
Cathy has created a website for her shop of homemade chocolates and scented
candles. Apart from traditional retailing, she sends e-mails to the people in her
neighborhood. She also informs customers about various promotional offers through
pamphlets. Which of the following techniques best describes Cathy's overall marketing
method?
A. Embedded marketing
B. Digital marketing
C. Multichannel marketing
D. Word-of-mouth marketing
Multichannel marketing is the use of several different channels to reach your
customers, for example, a website, direct mail, and traditional retailing.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 3 Hard
Topic: What Kinds of Part-Time Entrepreneurship Exist?
50.A listed, live connection to a different website, which in turn displays a similar link to the
first website is called a(n):
(p. 130)
A. sponsored link.
B. reciprocal link.
C. back link.
D. incoming link.
Reciprocal link is a listed, live connection to a different website, which in turn displays a
similar link to the first website.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
51.
(p. 130)
_____ is a general approach to website design intended to result in the site being
displayed toward the beginning of a search engine's listing for that term.
A. Sponsored link
B. Embedded placement
C. Trackback submitter
D. Search engine optimization
Search engine optimization is a general approach to website design intended to result
in the site being displayed toward the beginning of a search engine's (e.g., Google,
Yahoo!, etc.) listing for that term.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
52. Smith & Roden Enterprises (SRE), a law firm, paid a leading search engine to put their
website at the top of the search engine's search list. This form of advertising
used by SRE for promotion of their firm is known as _____.
(p. 130)company's
A. sponsored link
B. embedded placement
C. trackback submitter
D. benchmarking
Sponsored link is a form of paid advertising that gets a company's website at the top of
a search list.
AACSB: Reflective Thinking
Blooms: Apply
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 2 Medium
Topic: What Kinds of Part-Time Entrepreneurship Exist?
53.
Which of the following is an example of a search engine?
(p. 131)
A. AOL
B. Facebook
C. LinkedIn
D. MySpace
There are literally hundreds of search engines, but there are four very major
ones—Google, Yahoo! Microsoft, and AOL. The next six largest search engines share
6 percent of the searches.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
54._____ refers to a fee the service levels on a person or a firm for any variety of problems
related to the sale.
(p. 133)
A. Payback
B. Overhead cost
C. Chargeback
D. Optional cost
Chargeback is a fee the service levels on a person or firm for any variety of problems
related to the sale, for example, a lost, stolen, or fraudulent card was used, the
customer reports nothing was received, the product was not the one promised, or there
were problems with the product. While chargebacks in stores is around 0.1 percent of
sales, online chargeback rates can be as much as five times higher.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
55. An auction in which the low bid gets the business or wins is known as a _____ auction.
(p. 133)
A. reserve
B. buyout
C. forward
D. reverse
A reverse auction is an auction in which the low bid gets the business or wins.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
56.
Which of the following is true of the eBay website?
(p. 135)
A. The eBay method of auctioning means one pays a fee for posting his or her product
and a sales fee based on the final bid price when the item sells.
B.
Most online transactions use a credit card or an online payment system like
PayMate, which is a division of eBay.
C. eBay does not allow buyers and sellers any anonymity.
D. On eBay, one can list a single item for sale only by creating a website to support his
or her effort.
Most online transactions use a credit card or an online payment system like PayPal
(which is a division of eBay). eBay allows a bit of anonymity. One can list a single item
for sale on eBay, without creating a website or a company to support his or her effort.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 2 Medium
Topic: What Kinds of Part-Time Entrepreneurship Exist?
57.
(p. 135)
_____ price is a minimum acceptable selling price in an auction.
A. Absolute
B. Reserve
C. Forward
D. Small-value
Reserve price is a minimum acceptable selling price in an auction. If the bidding does
not exceed the price, the sale will not go through.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
58.
Which of the following is a free way to get one's name and business known?
(p. 137)
A. Through improving the search engine optimization of one's business
B. Tele marketing
C. Distributing business cards, stationery, printed newsletters, and brochures
D.
Making informed comments on blogs and discussion forums related to one's
business
There is a free way to get one's name (and business) known, and that is by making
informed comments on blogs and discussion forums related to one's business. There
are also several advertising channels that come with costs. Obviously, the traditional
approaches to advertising, like business cards, stationery, printed newsletters, and
brochures, cost money (although these days you can print just the quantity you need
on a good color printer).
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
59.
(p. 138)
Which of the following part-time business approaches does the door-to-door model
represent?
A. Auctioning
B. Consignment tracking
C. Home retail
D. Mail order
There are several approaches closely identified with part-time businesses. Historically,
two methods have been mentioned most often—home retail (which consists of home
parties and door-to-door selling), and stands.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
60.
Which of the following is true with regard to home retail?
(p. 138)
A.
The disadvantages of home businesses include the slow speed and difficulty of
setup.
B.
The ability to do the work away from home and employer minimizes potential
conflicts.
C. The advantage of home retail is that it provides a high steady income.
D. The high cost of getting started is one of the drawbacks of home retail.
The advantages of home businesses are the speed and ease of setup, the low cost of
getting started, and the ability to do the work away from home and employer, thus
minimizing potential conflicts.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 2 Medium
Topic: What Kinds of Part-Time Entrepreneurship Exist?
61.
Which of the following is true of home businesses?
(p. 138)
A. It is very difficult to set up.
B. It requires a very high initial capital to start up.
C. It does not allow one to work away from his or her employer.
D. It provides highly variable income.
The disadvantages come from always working "on the road," lacking a base from which
one can organize and work, having a highly variable income, and finding ways for
customers to get in touch with the person concerned (although cell phones and e-mail
have made a major difference).
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
62.
The fundamental success factor in door-to-door selling is:
(p. 138)
A. closing the sale.
B. having a location with enough foot traffic.
C. approaching a "high-rent" district.
D. having a perishable product for sale.
The fundamental success factor in door-to-door selling is closing the sale. Closing
means getting the customer to agree to buy.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
63.
In door-to-door selling, _____ refers to getting the customer to agree to buy.
(p. 138)
A. opening
B. promoting
C. auctioning
D. closing
The fundamental success factor in door-to-door selling is closing the sale. Closing
means getting the customer to agree to buy.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
64.
(p. 138)
An approach to selling in which the salesperson recruits customers to become
distributors of the product or service to others is known as _____.
A. network marketing
B. auctioning
C. catalog selling
D. online marketing
One variation on the home model is network marketing efforts, also called multilevel
marketing or MLM. Network marketing is an approach to selling in which the
salesperson recruits customers to become distributors of the product or service to
others.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
65.
Which of the following activities mimics multilevel marketing?
(p. 138)
A. Forward networking
B. Reserved auctioning
C. Counterfeit catalog selling
D. Illegal pyramid schemes
In multilevel marketing, extra caution is necessary because illegal pyramid schemes
are often made to look like legal MLMs. For example, where the fees paid by newly
recruited network members are paid directly to more senior network members, there is
a good chance that one is seeing an illegal pyramid scheme.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
66.
One of the most ancient forms of small business is:
(p. 138)
A. stand retailing.
B. auctioning.
C. mail order.
D. licensing.
Stand retailing—the roadside, flea market, farmers' market, or craft fair business—is
one of the most ancient forms of small business. It is mentioned in the Bible, and
marketplaces full of stands have been found in virtually all archeological digs.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
67.
Which of the following is considered an advantage of stand retailing?
(p. 139)
A. Variable income
B. Minimum startup investment
C. Steady income
D. Strong customer base
The advantage of stand businesses is that one can start with little investment. Stands
can be a box or ground cloth. They also do not require a lot of investment in inventory.
There are a variety of locations where a stand can be set up, such as flea markets.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
68.
All of the following are success factors to "stand retail" EXCEPT that:
(p. 139)
A. it tends to be either semipermanent ones or movable ones.
B. it needs to be built in places where there is less foot or vehicle traffic.
C. it can be quickly established.
D. it does not require a lot of investment in inventory.
The key success factor for a stand is having a location where there is enough foot or
vehicle traffic to sustain the business. High traffic concentrations are why flea markets,
farmers' markets, and craft fairs are popular locales for stands.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
69.
In stand retail, the key success factor for a stand is:
(p. 139)
A. having a location where there is enough foot or vehicle traffic.
B. having a variable income.
C. having nonperishable sale items.
D. sharing with other businesses to minimize the high rent.
The key success factor for a stand is having a location where there is enough foot or
vehicle traffic to sustain the business. High traffic concentrations are why flea markets,
farmers' markets, and craft fairs are popular locales for stands.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
70.
Which of the following represents an advantage of the consignment approach?
(p. 141)
A. Full-time sales with only a part-time involvement from a person
B. High potential for competing offers
C. Less amount of time before payout
D. Complete lack of inventory
The advantage of consignment approaches is that they permit full-time sales with only
a part-time involvement from a person, low setup cost, a low risk level, and the
flexibility that comes from the variety of consignment agents and agencies available to
the person concerned.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
71.
Which of the following is true with regard to the consignment approach of selling?
(p. 141)
A. They permit full-time sales only with full-time involvement from a person.
B. They are high-risk level undertakings.
C. They have low profitability because of agent's fees.
D.
They have no flexibility despite variety of consignment agents and agencies
available.
The advantage of consignment approaches is that they permit full-time sales with only
a part-time involvement from a person, low setup cost, a low risk level, and the
flexibility that comes from the variety of consignment agents and agencies available to
the person concerned.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
72.
Which of the following represents a disadvantage of the consignment approach?
(p. 141)
A. Availability of different consignment stores and auctions
B. Long amount of time before payouts
C. Full-time sales with only a part-time involvement from the owner
D. High setup costs
The disadvantages of the consignment approach can include little effort being put forth
to sell your product, high potential for competing offerings, long amount of time before
payouts, and lower profitability because of agent's fees.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-03 Describe the major paths to part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Kinds of Part-Time Entrepreneurship Exist?
73.
(p. 143)
_____ refers to information provided to the government concerning the existence of,
name of, nature of, and contact information for one's business.
A. Zoning
B. Franchising
C. Registration
D. Bootstrapping
For businesses run from a home or commercial venue like a fair or consignment shop,
most states and localities require some form of registration, but the requirements vary
so it is important to check. Registration refers to information provided to the
government concerning the existence of, name of, nature of, and contact information
for one's business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-04 Use the BRIE model to describe what it takes to be successful in part-time
entrepreneurship.
Level of Difficulty: 1 Easy
Topic: Success Factors for Part-Time Businesses
74.
(p. 143)
For part-time businesses, _____ refers to the documented permission from the
government to run a business.
A. bootstrapping
B. benchmarking
C. licensing
D. zoning
Part-time businesses have to deal with government, and three issues that pop up
repeatedly are: registration or licensing, taxes, and zoning. Licensing is the
documented permission from the government to run a business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-04 Use the BRIE model to describe what it takes to be successful in part-time
entrepreneurship.
Level of Difficulty: 1 Easy
Topic: Success Factors for Part-Time Businesses
75.
The assignment of work to others over whom one has power is referred to as:
(p. 144)
A. delegation.
B. adverse possession.
C. benchmarking.
D. zoning.
Delegation happens when you assign work to those over whom you have power,
usually people you employ, those volunteering to help you out, or family members.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-05 Describe the advantages and pitfalls of delegating and outsourcing.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
76. Contracting with people or companies outside one's business to get work done for the
business is known as:
(p. 144)
A. benchmarking.
B. bootstrapping.
C. outsourcing.
D. licensing.
Outsourcing is contracting with people or companies outside one's business to get
work done for the business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-05 Describe the advantages and pitfalls of delegating and outsourcing.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
77.
Finding a low-cost or no-cost way of doing business is called _____.
(p. 145)
A. moonlighting
B. bootstrapping
C. outsourcing
D. licensing
Bootstrapping is using low-cost or free techniques to minimize one's cost of doing
business. It is a popular approach for all businesses and essential for part-time firms.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-06 Explain the benefits of bootstrapping methods for entrepreneurs.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
78.
Undercapitalization refers to:
(p. 145)
A.
not having enough money available to the business to cover shortfalls in sales or
profits.
B. not having enough money to capitalize on new business ventures.
C. finding a low-cost or no-cost way to do something.
D. not having enough money available to start a part-time business.
Undercapitalization is not having enough money available to the business to cover
shortfalls in sales or profits.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-06 Explain the benefits of bootstrapping methods for entrepreneurs.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
79.
(p. 145)
Which of the following is a good technique to counter undercapitalization in part-time
businesses?
A. Aggrandizing
B. Zoning
C. Bootstrapping
D. Offshoring
Bootstrapping is using low-cost or free techniques to minimize one's cost of doing
business. It is a popular approach for all businesses and essential for part-time firms.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-06 Explain the benefits of bootstrapping methods for entrepreneurs.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
80.
Equity refers to:
(p. 146)
A. the ownership of a business as a whole.
B. the ownership of a portion of a business.
C. finding a low cost or no cost way to do a business.
D. acquiring permission from the government to do a part-time business.
Equity is defined as the ownership of a portion of a business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-06 Explain the benefits of bootstrapping methods for entrepreneurs.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
81.
All of the following are the key ideas of bootstrapping EXCEPT:
(p. 146)
A. cutting your personal and business expenses.
B. seeing if you can get things which you need for free.
C. seeing if you can substitute a lower-cost alternative before you buy.
D. borrowing heavily from banks while keeping your money untouched.
If one needs money, they should borrow it from self first, then from family, then friends,
and after that banks, credit card advances, and finally, credit companies, in that order.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-06 Explain the benefits of bootstrapping methods for entrepreneurs.
Level of Difficulty: 2 Medium
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
82.
Working on one's own part-time business after a regular job is referred to as:
(p. 146)
A. moonlighting.
B. bootstrapping.
C. outsourcing.
D. licensing.
Working on one's own part-time business after a regular job is called moonlighting. The
two ethical challenges of part-time businesses are moonlighting and aggrandizing.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-07 Describe the ethical challenges of part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
83.
(p. 148)
All of the following are major concerns of moonlighting EXCEPT:
A. conflict of interest.
B. bootstrapping.
C. cannibalizing sales.
D. poisoning the well.
The major concerns of moonlighting include conflict of interest, cannibalizing sales, and
poisoning the well.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-07 Describe the ethical challenges of part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
84.
_____ means taking business away from one's employer.
(p. 148)
A. Bootstrapping
B. Licensing
C. Cannibalizing
D. Aggrandizing
Cannibalizing means taking business away from one's employer. It can come from
taking sales away from one's employer or taking working hours away to do one's own
business.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-07 Describe the ethical challenges of part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
85.
_____ refers to creating a negative impression among one's employers' customers.
(p. 148)
A. Bootstrapping
B. Cannibalizing
C. Aggrandizing
D. Poisoning the well
Poisoning the well refers to creating a negative impression among one's employers'
customers.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-07 Describe the ethical challenges of part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
86.
Attempting to make oneself seem more accomplished than reality is referred to as:
(p. 148)
A. aggrandizing.
B. poisoning the well.
C. moonlighting.
D. cannibalizing.
Attempting to make one's business or self seem more accomplished or grander than
reality is known as aggrandizing. This misleading impression, called aggrandizing, can
spell the death of a firm if discovered at an inconvenient time.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-07 Describe the ethical challenges of part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
87.
The most typical form of aggrandizement in part-time businesses is:
(p. 148)
A. implying that a firm is a full-time one when it is only part time.
B. creating a positive impression among one's employers' customers.
C. working on own part-time business after regular job.
D. finding a low-cost or no-cost way to do something.
The most typical form of aggrandizement is implying that a firm is a full-time one when
it is only part time.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-07 Describe the ethical challenges of part-time entrepreneurship.
Level of Difficulty: 2 Medium
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
88.
(p. 148)
_____ refers to a situation when what is best for one's part-time business is different
from what is best for his or her full-time employer.
A. Cannibalizing
B. Aggrandizing
C. Conflict of interest
D. Poisoning the well
Conflict of interest refers to a situation when what is best for one's part-time business is
different from what is best for his or her full-time employer. The key is to keep ones fulltime and part-time jobs clearly separate.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-07 Describe the ethical challenges of part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
89.
Which of the following best describes cannibalizing?
(p. 148)
A.
Ken uses the money he gets from his full-time job as a chef to run his part-time
business of graphic designing.
B. Mandy uses her employer's client list from her full-time job as a house painter to get
customers for her own part-time house painting business.
C.
Cathy, who does computer repairs, lies to customers about having an office
downtown when she actually works part-time from her home.
D.
Jenson misses his deadlines at his full-time day job because he works late nights
as a part-time music producer.
Cannibalizing means taking business away from ones employer. This can come from
your taking sales away from your employer or taking working hours away to do your
own business. This is a real problem if your part-time business is similar to your fulltime occupation, for example, if you are a painter for a building contractor in your day
job and do similar sorts of painting as your part-time moonlighting enterprise.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-07 Describe the ethical challenges of part-time entrepreneurship.
Level of Difficulty: 2 Medium
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
90.
Cannibalizing is one of the major concerns when _____.
(p. 147148)
A. moonlighting
B. aggrandizing
C. benchmarking
D. bootstrapping
Working on one's own part time after his or her regular job is called moonlighting, and it
poses particular risks. The major concerns are conflict of interest, cannibalizing sales,
and poisoning the well.
AACSB: Analytic
Blooms: Remember
Learning Objective: 05-07 Describe the ethical challenges of part-time entrepreneurship.
Level of Difficulty: 1 Easy
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
91.
Which of the following best describes conflict of interest?
(p. 148)
A. Sarah works a full-time day job as a waitress and then runs a part-time baby-sitting
service at night.
B.
Cathy, who does computer repairs, lies to customers about having an office
downtown when she actually works part-time from her home.
C.
Jenson misses his deadlines at his full-time day job because he works late nights
as a part-time music producer.
D.
Ken uses the money he gets from his full-time job as a chef to run his part-time
business of graphic designing.
Conflicts of interest happen when what is best for one's part-time business is different
from what is best for his or her full-time. The key is to keep full-time and part-time jobs
clearly separate.
AACSB: Analytic
Blooms: Understand
Learning Objective: 05-07 Describe the ethical challenges of part-time entrepreneurship.
Level of Difficulty: 2 Medium
Topic: What Are the Challenges of Being an Entrepreneur Part Time?
92.
Which of the following best describes aggrandizing?
(p. 148)
A.
Ken uses the money he gets from his full-time job as a chef to run his part-time
business of graphic designing.
B. Sarah works a full-time day job as a waitress and then runs a part-time baby-sitting
service at night.
C.
Jenson misses his deadlines at his full-time day job because he works late nights
as a part-time music producer.
D.
Cathy, who does computer repairs, lies to customers about having an office in a
business park when she actually works part-time from her home.
Occasionally, an entrepreneur sees an opportunity that is possible, but a stretch. If it
looks like a stretch to the customers, the entrepreneur may start thinking about making
the firm seem bigger, more substantial, or more capable than it really is. This
misleading impression is referred to as aggrandizing.
Chapter 05 Small Business Marketing: Product and Pricing
Strategies
True / False Questions
1.
A product can include goods, services, and ideas.
(p. 274)
TRUE
A product, in general terms, is anything that is offered to the market to satisfy
consumer wants, needs, and demands. This can include goods (like Beyond Fleece's
clothing, a car, a can of green beans, a CD), services (haircut, divorce), people
(political candidates, celebrities), and ideas (a political platform, an environmental
message).
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-01 Recognize the characteristics of goods and services.
Level of Difficulty: 1 Easy
Topic: Product
2.
Services have separability of production and consumption.
(p. 275)
FALSE
The production and consumption of the service happen at the same time so they
cannot be separated. On the other hand, goods have separability of production and
consumption.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-01 Recognize the characteristics of goods and services.
Level of Difficulty: 1 Easy
Topic: Product
3. The concept of total product includes how customers describe one's good or service.
(p. 277)
TRUE
The total product includes the entire bundle of product and services that a person
offers, but is based not only on what the person as the small business owner thinks
about the product, but also about how customers think about it.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-02 Define the total product.
Level of Difficulty: 1 Easy
Topic: Product
4.
(p. 277)
The total product is the most general description of a business, and the one which
captures the smallest amount of what is special about a business.
FALSE
The core product is the most general description of a business, and the one which
captures the smallest amount of what is special about a business.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-02 Define the total product.
Level of Difficulty: 2 Medium
Topic: Product
5.
(p. 278)
The advantage of separating company name from brand name is that if a product
doesn't take off, one can drop the product line with minimal impact to the company
image.
TRUE
The nice thing about separating company name from brand name is that if a product
doesn't take off—or fails catastrophically—one can drop that product line with minimal
impact to the company image.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-02 Define the total product.
Level of Difficulty: 2 Medium
Topic: Product
6.
As a small business adds employees, the importance of its owner increases.
(p. 278)
FALSE
For small businesses, the entrepreneur and the business often start out as one and the
same. As the business adds employees, the importance of the owner declines.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-02 Define the total product.
Level of Difficulty: 1 Easy
Topic: Product
7.
(p. 279)
Marketing and new product experts believe that most of the small business failures
could have been avoided by following the new product development (NPD) process.
TRUE
For small businesses, the entrepreneur and the business often start out as one and the
same. As the business adds employees, the importance of the owner declines, but
realize that the brand the owner has created will always be dependent on him or her.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-02 Define the total product.
Level of Difficulty: 2 Medium
Topic: Product
8.
(p. 279)
For me-too products, the stages of new product development are always extensively
long.
FALSE
The new product development process may take a few hours for simple products that
are similar to existing products (commonly referred to as me-too products) or may take
years and years of preparation and testing, such as introducing a new pharmaceutical
product. For me-too products, steps may even be skipped.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 2 Medium
Topic: Product
9.
(p. 279)
The new product development process is likely to be easier for services than for
innovative goods.
TRUE
For goods, there is a cost for design and manufacturing as well as a delay, so trying
out new products is more of a gamble. For service firms, it can be easier.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 1 Easy
Topic: Product
10.
Competitors of a company are not a source of business ideas.
(p. 279)
FALSE
Sources of business ideas include end users, customers, salespeople, market
research, and competitors.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 1 Easy
Topic: Product
11.
(p. 283)
If a rapid prototyping model can be developed, the molds for manufacturing can be
made inexpensively by most modern manufacturers.
TRUE
If a rapid prototyping model can be developed, the molds for manufacturing can be
made inexpensively by most modern manufacturers.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 1 Easy
Topic: Product
12.
(p. 284)
Optimum price is the lowest price that will produce the desired level of sales in an
intended market.
FALSE
The fundamental goal of pricing should be setting the optimum price, the highest price
that would generate the most income possible for the product or service you are selling
over the course of a year.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-04 Understand why pricing is an important but difficult task for small businesses
Level of Difficulty: 1 Easy
Topic: Pricing
13.
(p. 288)
Setting prices higher than the competition without providing customers with the
perception of receiving greater value will lead to lower overall volume.
TRUE
Setting prices higher than the competition without providing customers with the
perception of receiving greater value can only lead to lower overall volume.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 1 Easy
Topic: Pricing
14.Increasing market share usually means pricing toward the low end of the competition in
order to take market share from the competition.
(p. 289)
TRUE
firms set prices to maximize profits or to increase market share. Increasing market
share usually means pricing toward the low end of the competition in order to take
market share from the competition. This strategy becomes more popular as a product
reaches the maturity phase of the product life cycle.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 1 Easy
Topic: Pricing
15.
(p. 288;
290)
It's always easier for a business to raise prices than it is to lower them as it will face
much less customer dissatisfaction.
FALSE
It's always easier to lower prices than it is to raise them. If a business's initial price
needs to be adjusted, it will face much less customer dissatisfaction if its response is to
lower prices rather than to raise them.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 1 Easy
Topic: Pricing
16.
It's almost always a good idea for a small firm to try to compete on price.
(p. 293)
FALSE
It's almost always a bad idea for a small firm to try to compete on price. Competing on
price may lead to a price war in which a small firm just doesn't have the staying power
of a big firm. Lower prices are "throwing away" profit that small businesses really need.
They can signal the customers that the product isn't as high quality as that of the
competitors'.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 1 Easy
Topic: Pricing
17. Price skimming involves setting a price above that of the competition so as to indicate
a higher quality or that a product is a status symbol.
(p. 293)
TRUE
Price skimming involves setting a price above that of the competition so as to indicate
a higher quality or that a product is a status symbol.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 1 Easy
Topic: Pricing
18.
(p. 296)
Random discounts shouldn't be too frequent because consumers begin to realize if
they stock up in this sales period, they can probably wait until the next sales period.
TRUE
Random discounting is when one runs a sale unexpectedly. Random discounts
shouldn't be too frequent because consumers begin to realize if they stock up in this
sales period, they can probably wait until the next sales period.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 1 Easy
Topic: Pricing
19. For services, referral bonuses are an inefficient tool because the recommendation of a
friend or relative is of no importance in purchasing or in trying a new service.
(p. 298)
FALSE
For services, the recommendation of a friend or relative is often a deciding factor in a
purchase or in trying a new service, referral bonuses can be a powerful technique.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 1 Easy
Topic: Pricing
20.
(p. 300)
Even if a competitor matches a sale or offers some other promotion to match one's
offering, it's not as aggressive an action as a price war.
TRUE
Customers recognize sales for what they are, a temporary reduction in price, and these
won't tarnish your product image. Even if the competition matches a sale or offers
some other promotion to match your offering, it's not as aggressive an action as a price
war.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 1 Easy
Topic: Pricing
Multiple Choice Questions
21.
Which of the following statements is true about products?
(p. 274)
A.
People such as political candidates and celebrities cannot be considered as
products.
B. Most of the products sold today are combinations of both goods and services.
C. Products in terms of goods are generally less homogeneous than services.
D. Products in terms of goods are more inseparable from their providers than services.
Most people's first thoughts are to think in terms of goods or services, but in reality
most of what people buy, and what small businesses make, are combinations of goods
and services.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-01 Recognize the characteristics of goods and services.
Level of Difficulty: 2 Medium
Topic: Product
22.
An item's capability of being touched, seen, tasted, or felt is called _____.
(p. 274)
A. tangibility
B. legitimacy
C. mutuality
D. perishability
Tangibility is an item's capability of being touched, seen, tasted, or felt. A car has
tangibility; it is something a person can touch, but the cost of a warranty on the car, is a
service, and something intangible.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-01 Recognize the characteristics of goods and services.
Level of Difficulty: 1 Easy
Topic: Product
23.
Which of the following is most likely to be an example of a good-dominated product?
(p. 274)
A. Purchasing a sewing machine with a warranty
B. Leasing a sewing machine
C. Hiring the services of a tailor
D. Renting a sewing machine
A sewing machine has tangibility; it is something a person can touch. But it also covers
the cost of a warranty on the machine, which is a service, and something intangible.
Still the vast majority of what a person is paying will go for the machine itself, so most
such purchases would be an example of a good-dominated product.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-01 Recognize the characteristics of goods and services.
Level of Difficulty: 1 Easy
Topic: Product
24.
Purchasing a car with a warranty is most likely to be an example of a _____.
(p. 274)
A. pure good
B. good-dominated product
C. pure service
D. hybrid good
A car has tangibility; it is something one can touch, but it also covers the person
checking for the cost of a warranty on the car, which is a service, and something
intangible. If the person included a satellite radio, or a cell service, or an extended
warranty, the person has bought more services. Still the vast majority of what the
person is paying will go for the car itself, so most car purchases would be an example
of a good-dominated product.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-01 Recognize the characteristics of goods and services.
Level of Difficulty: 1 Easy
Topic: Product
25.
Which of the following statements is true about pure services?
(p. 275)
A. They are separable from consumption.
B. They are tangible.
C. They are heterogeneous.
D. They are nonperishable.
Products are generally thought of as homogenous or consistent. They should have the
same quality every time a person buys one. Services, however, can be more
heterogeneous.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-01 Recognize the characteristics of goods and services.
Level of Difficulty: 2 Medium
Topic: Product
26.
Pure goods are more _____ than pure services.
(p. 275276)
A. perishable
B. inconsistent
C. inseparable
D. homogenous
A characteristic differentiating goods and services is heterogeneity. Products are
generally thought of as homogenous or consistent. They should have the same quality
every time a person buys one. Services, however, can be more heterogeneous.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-01 Recognize the characteristics of goods and services.
Level of Difficulty: 1 Easy
Topic: Product
27. The first time Jena visited Blue Corals Inn, a restaurant in her neighborhood, she was
delighted with the food and service quality. However, the next time she dined at the
same place, the restaurant's food and service seemed to have lost its quality. This
scenario best illustrates the _____ characteristic of services.
(p. 275276)
A. perishability
B. tangibility
C. heterogeneity
D. absorptivity
A characteristic differentiating goods and services is heterogeneity. Products are
generally thought of as homogenous or consistent. They should have the same quality
every time a person buys one. Services, however, can be more heterogeneous.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-01 Recognize the characteristics of goods and services.
Level of Difficulty: 2 Medium
Topic: Product
28.
(p. 276)
A service typically exhibits the characteristic of _____ because if it is not used when
offered, it cannot be saved for later use.
A. perishability
B. tangibility
C. absorptivity
D. homogeneity
A service exhibits perishability in that if it is not used when offered, it cannot be saved
for later use. Car rentals show the problem of the perishability of services. For
example, if a cab goes without a fare for an hour, that is one hour of revenue that is
lost forever—it literally perished.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-01 Recognize the characteristics of goods and services.
Level of Difficulty: 1 Easy
Topic: Product
29.
(p. 276)
The entire bundle of products, services, and meanings of one's offering; including
extras like service, warranty, or delivery, as well as what the product means to the
customer refers to _____.
A. augmented product
B. total product
C. hybrid product
D. pure good
The total product includes the entire bundle of product and services that you offer, but
is based not only on what you as the small business owner thinks about the product,
but also about how customers think about it.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-02 Define the total product.
Level of Difficulty: 1 Easy
Topic: Product
30. A(n) _____ typically means the core product plus features that tend to differentiate the
product from competition.
(p. 277)
A. pure good
B. hybrid product
C. augmented product
D. me-too product
An augmented product means the core product plus features that tend to differentiate it
from the competition.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-02 Define the total product.
Level of Difficulty: 1 Easy
Topic: Product
31.
The core product typically includes:
(p. 277)
A. the basic description of what a company or a product does.
B. features of a product that differentiates it from competition.
C. what a product means to the customers.
D. value and cost benefits customers incur from a product.
Underneath the total product and the augmented product lies the core product, which is
the basic description of what a company or a product does.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-02 Define the total product.
Level of Difficulty: 1 Easy
Topic: Product
32. The group of people on which a marketer focuses promotion and sales efforts is called
a _____.
(p. 277)
A. focus group
B. target market
C. strategic group
D. sales pitch
The group of people on which a marketer focuses promotion and sales efforts is called
a target market.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-02 Define the total product.
Level of Difficulty: 1 Easy
Topic: Product
33.
(p. 278)
Which of the following should be avoided while coming up with a company or brand
name considering the possibility of future expansion?
A. Selecting a company or brand name that describes the firm or the product
B. Using one name for the company and a separate brand name for the products
C. Using names that are relatively easy to spell and pronounce
D. Selecting a company or brand name that's too narrow
Selecting a company or brand name that's too narrow might not work when a firm plans
to grow or expand.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-02 Define the total product.
Level of Difficulty: 2 Medium
Topic: Product
34. ZestOne Technologies has launched a series of tablet computers that are similar to a
competitor's product that already exists in the market. Such products are typically
termed as _____.
(p. 279)
A. me-too products
B. prototypes
C. augmented products
D. complementary goods
Me-too products are products that are essentially similar to something already on the
market.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 2 Medium
Topic: Product
35.
Which of the following statements is true about me-too products?
(p. 279)
A.
For me-too products, steps in new product development process should never be
skipped.
B. The vast majority of new ideas for small businesses will be me-too products.
C. Idea generation is the longest stage in the development of me-too products.
D.
Testing a me-too product's differential advantage over competition is a wasted
effort.
Most businesses are imitative in nature, so the vast majority of new ideas for small
businesses will be me-too products.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 2 Medium
Topic: Product
36.
Which of the following is the first stage of the new product development process?
(p. 279)
A. Test marketing
B. Commercialization
C. Feasibility study
D. Idea generation
Behind every great product is a great idea. The traditional first idea generator—and
often what gets an entrepreneur started—is something they need or want themselves
and either can't find or can't find the way they want it.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 1 Easy
Topic: Product
37. Which of the following statements best describes the process of idea screening in new
product development?
(p. 280)
A. It involves specifying the details of each idea's technological feasibility, its cost, how
it can be marketed, and its market potential.
B.
It is the process of selecting the most promising ideas to be further evaluated for
feasibility.
C. It involves creating the first versions of products called prototypes which are used in
further consumer testing.
D. It is the process of mass producing a new product so that consumers can avail it.
Idea screening is the process of selecting the most promising ideas to be further
evaluated for feasibility.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 2 Medium
Topic: Product
38.
(p. 280)
The research and development team of Leonide Inc. has generated five different
product ideas. All five ideas are being rated against each other on their characteristics
such as product uniqueness, idea profitability, protectable intellectual property, and
product team quality. Based on their ranking in this stage, only three ideas will make it
to the immediate next step which will be the stage of _____.
A. idea generation
B. commercialization
C. feasibility study
D. market introduction
Idea screening involves generating multiple ideas and comparing them head-to-head to
help clarify what characteristics are important and which idea has the greatest
potential. Done this way, it is possible to screen out the less promising ideas and
identify the ideas one wants to take to the next stage, idea evaluation or feasibility
study.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 2 Medium
Topic: Product
39. Which of the following stages of new product development typically involves specifying
details of each idea's technological feasibility, its cost, how it can be marketed, and
its market potential?
(p. 280) the
A. Idea generation
B. Market introduction
C. Idea evaluation
D. Test marketing
Idea evaluation is an exhaustive process of specifying the details of each idea's
technological feasibility, its cost, how it can be marketed, and its market potential.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 1 Easy
Topic: Product
40.While developing a new product, in the product development stage, the first versions of
products are used in further consumer testing. These first versions of products are
called _____.
(p. 281)
A. pure goods
B. prototypes
C. me-too products
D. hybrids
The first versions of a product are called prototypes and are used in further consumer
testing. In the product development stage, if a person is just starting out (rather than
adding a product to an existing product line), he or she may need to get a prototype
made.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 1 Easy
Topic: Product
41. _____ is best described as the process of selling prototype of a product in either a real
or simulated market environment.
(p. 282)
A. Test marketing
B. Moonlighting
C. Bootstrapping
D. Commercialization
Test marketing involves selling the prototype in either a real or simulated market
environment. Standard test marketing introduces the product and the marketing
strategy in the actual environment.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 1 Easy
Topic: Product
42.
(p. 281282)
In new product development process, the product development stage typically
involves:
A. testing the feasibility of product ideas.
B. creating a marketing plan for the final product.
C. introducing product prototypes to test markets.
D. commercializing the new product.
The product development stage involves creating the first versions of product ideas
that are called prototypes, which are used in further consumer testing. Once the
prototype is developed and tested, the product is ready for test marketing. Test
marketing involves selling the prototype in either a real or simulated market
environment.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 2 Medium
Topic: Product
43.
Which of the following is the biggest problem with simulated test markets?
(p. 282)
A. They cannot be computer-generated.
B. They make it easy for competitors to "steal" one's ideas.
C. They do not always reflect actual buying behavior.
D.
They can be used only in the commercialization stage and not in the product
development stage.
While stimulated test markets are relatively safe from competitive interference, the
biggest problem with simulations is that they are artificial and do not always reflect
actual buying behavior.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 2 Medium
Topic: Product
44.
_____ is best described as the process of making a new product available to
consumers.
(p. 283)
A. Commercialization
B. Factoring
C. Pilot testing
D. Liquidation
Commercialization is the process of making the new product available to consumers. If
a rapid prototyping model can be developed, the molds for manufacturing can be made
inexpensively by most modern manufacturers.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 1 Easy
Topic: Product
Scenario: Tinkle Toys, Inc.
Raven, a student at a local university majoring in psychology, has always been
fascinated by toys. So having created a business plan, she officially established her
business-Tinkle Toys. Raven is exploring various product ideas and pricing strategies
for her toy business. Answer following two questions based on this scenario.
45.
Raven has been researching for product ideas by interacting with children, young
and by carefully studying the competitors' toys. This has helped her generate
several ideas. Which of the following is most likely to be the next step for Raven?
(p. 279- mothers,
283)
A. Test marketing
B. Product development
C. Idea screening
D. Commercialization
Idea screening is the process of selecting the most promising ideas to be further
evaluated for feasibility.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 2 Medium
Topic: Product
46.
(p. 280)
Raven created the sample versions of her toy products and tested them in
kindergartens and play parks. These sample versions of the toys are referred to as
_____.
A. hybrids
B. pure goods
C. me-too products
D. prototypes
The first versions of a product are called prototypes and are used in further consumer
testing. In the product development stage, if a person is just starting out (rather than
adding a product to an existing product line), he or she may need to get a prototype
made.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-03 Differentiate the stages of new product development
Level of Difficulty: 2 Medium
Topic: Product
47._____ refers to the highest price of a product that will produce the desired level of sales
in the intended market.
(p. 284)
A. Marginal price
B. External reference price
C. Optimum price
D. Reserve price
The optimum price is the price that would generate the most income possible for the
product or service a business is selling over the course of a year.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-04 Understand why pricing is an important but difficult task for small businesses
Level of Difficulty: 1 Easy
Topic: Pricing
48.
(p. 285)
_____ is a price-setting method where an amount is added to the cost of a product to
set the retail price and provide a profit.
A. Markup pricing
B. Marginal pricing
C. Internal reference pricing
D. Differential pricing
Markup pricing is a price-setting method where an amount is added to the cost of a
product to set the retail price and provide a profit.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 1 Easy
Topic: Pricing
49.
(p. 285)
Which of the following terms refers to the amount of profit an entrepreneur incurs,
usually stated as a percentage of the total price?
A. Capital
B. Margin
C. Debt
D. Harvest
Margin refers to the amount of profit, usually stated as a percentage of the total price.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 1 Easy
Topic: Pricing
50.
(p. 286)
The manufacturing costs incurred by Fred's Prints, a firm selling custom-designed Tshirts, are $10 per T-shirt, and the selling and distribution costs incurred are 6$ per Tshirt. To this total cost of $16, Fred adds a profit of $4 on each T-shirt and sells the Tshirt at $20. The markup here would be _____.
A. $20
B. $4
C. $16
D. $10
Markup refers to the amount an entrepreneur adds to costs to provide a profit.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 2 Medium
Topic: Pricing
51.
(p. 286)
A(n) _____ is best defined as a product for which there are few substitutes and for
which a change in price makes very little difference in quantity purchased.
A. pure good
B. augmented product
C. prototype
D. inelastic product
An inelastic product is a product for which there are few substitutes and for which a
change in price makes very little difference in quantity purchased. Housing, basic food,
basic clothing, basic transportation, and utilities are examples.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 1 Easy
Topic: Pricing
Scenario: Tinkle Toys, Inc.
Raven, a student at a local university majoring in psychology, has always been
fascinated by toys. So having created a business plan, she officially established her
business-Tinkle Toys. Raven is exploring various product ideas and pricing strategies
for her toy business.
52.
(p. 286)
Given the fact that there are several substitutes available for Tinkle Toys' products,
these Tinkle Toys' products are most likely to fall under the category of _____.
A. inelastic products
B. pure services
C. hybrid goods
D. elastic products
An elastic product is a product for which there are any number of substitutes and for
which a change in price makes a difference in quantity purchased.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 2 Medium
Topic: Product
53.
Which of the following is most likely to be an example for an elastic product?
(p. 286)
A. Staple foods
B. Gasoline
C. T-shirts
D. Basic utilities
An elastic product is a product for which there are any number of substitutes and for
which a change in price makes a difference in quantity purchased.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 1 Easy
Topic: Pricing
54.
Which of the following statements is true about elastic products?
(p. 286)
A. An elastic product does not have many substitutes or alternatives.
B.
A change in price of elastic products makes very little difference in quantity
purchased.
C. During economic bad times businesses that sell inelastic products close down more
often than those that sell elastic products.
D.
Customers will respond to price increases for elastic products much more
negatively than for inelastic products.
An increase in the price for an inelastic product, people might cut back, but only a little.
If money is tight, customers will respond to price increases for elastic products much
more negatively, because that is where their needs are more flexible, or elastic.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 2 Medium
Topic: Pricing
55.
If a business is trying to grow, the right price for its products is one that is:
(p. 288)
A.
necessary to capture a desired market share given an anticipated level of sales
volume.
B.
low enough to fill the business's production capacity and keep its key employees
working.
C.
high enough to maximize the probability of a sale without leaving money on the
table.
D. optimum enough to ensure that only a few customers can afford the product.
If a person is trying to make his or her business grow, or if the person is at the point
that he or she is preparing to exit the business, the right price is the one necessary to
capture a desired market share or to meet a specific profit target, given an anticipated
level of sales volume.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 2 Medium
Topic: Pricing
56.
The strategy of pricing toward the low end of the competition in order to take market
share from the competition becomes most popular as a product reaches the _____
phase of the product life cycle.
(p. 289)
A. growth
B. maturity
C. decline
D. introduction
More commonly, firms set prices to maximize profits or to increase market share.
Increasing market share usually means pricing toward the low end of the competition in
order to take market share from the competition. This strategy becomes more popular
as a product reaches the maturity phase of the product life cycle.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 1 Easy
Topic: Pricing
57.
Which of the following pricing practices is the most inappropriate?
(p. 290)
A.
Pricing a product, advertised for high quality and prestige, lower than the
competition
B.
Lowering prices during happy hour, hence discriminating against those who work
during that time period
C.
Lowering prices to capture maximum market share as the patent for a product
approaches its termination
D. Pricing a product low when a business is operating below capacity
Your price must be consistent with the rest of your marketing strategy. If you are
advertising high quality or prestige but price your product lower than the competition,
your customers will be confused at best, or at worst simply not believe your ads.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 2 Medium
Topic: Pricing
58.
(p. 290)
Zoruski Inc., a manufacturer of leather furniture, is facing problems with pricing its
products in the Asian market. Due to the presence of several middlemen in its
distribution channel, the prices of furniture rise up to three times from what they are
sold at in the home market. This problem faced by Zoruski Inc. is typically referred to
as _____.
A. price bundling
B. price escalation
C. price discrimination
D. loss leaders
If a business is using a traditional retailer, its product may go through several
middlemen before getting on the shelf. The end price to the customer might be four
times from what the business got. This is called price escalation.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 3 Hard
Topic: Pricing
59.Which of the following terms refers to an estimation of what a price should be based on
information gathered by a customer from sources such as advice, advertisements, or
comparison shopping?
(p. 291)
A. Mark-up price
B. Budget-based price
C. Augmented price
D. External reference price
External reference price is an estimation of what a price should be based on
information external to a consumer, such as advice, advertisements, or comparison
shopping.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 1 Easy
Topic: Pricing
60.
_____ is typically a source for consumers' internal reference price.
(p. 291)
A. Researching on the Internet
B. Taking advice from friends and family
C. Looking at competitive ads
D. Recollecting previous shopping experiences
Consumers' internal reference price may be based on the last time they purchased
something, recollections of what they might have read or heard in the past, their
understanding of how much it would cost to make it, or their perception of the value the
product has.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-05 Understand how elasticity; margin and value impact price setting.
Level of Difficulty: 2 Medium
Topic: Pricing
61.Turquoise Innovations Inc. has introduced a unique software that has no competition in
(p. 293) the market. The company has incurred huge research and development costs in order
to commercialize this software. Several business firms have been waiting for the
release of this product as it saves their cost of outsourcing finance functions. Hence,
the best pricing strategy this product will be _____.
A. penetration pricing
B. going rate pricing
C. limit pricing
D. price skimming
Skimming is charging the highest price the market will bear. This technique is usually
only possible if you are absolutely the first product or service of your type in the market,
and only if it's something people really want. Companies sometimes use this strategy in
order to recoup research and development costs or heavy marketing expenses.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 3 Hard
Topic: Pricing
62.
Which of the following statements is true of price skimming?
(p. 293)
A. It should be followed when there are many substitutes for a product.
B. It should be typically applied at the decline stage of the product life cycle.
C. It is not a long-term strategy for businesses to follow.
D. It helps establish a barrier to the entry of competitors.
Skimming is charging the highest price the market will bear. This technique is usually
only possible if you are absolutely the first product or service of your type in the market,
and only if it's something people really want. This method will attract competition, so it's
not a long-term strategy.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 2 Medium
Topic: Pricing
63. _____ refers to setting a price above that of the competition so as to indicate a higher
quality or that a product is a status symbol.
(p. 293)
A. Penetration pricing
B. Premium pricing
C. Limit pricing
D. Bait pricing
Prestige or premium pricing is setting a price above that of the competition so as to
indicate a higher quality or that a product is a status symbol.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 1 Easy
Topic: Pricing
64.
Which of the following will be an example of odd-even pricing?
(p. 293)
A. Buy a T-shirt for $19.89.
B. Buy four sandwiches and take the fifth one for free.
C. For purchases above $20 get a gift worth $5.
D. Market price is $25 and our price is $22.
Odd-even pricing simply means setting a price that ends with a 9, 7, or 5. Numbers that
are multiples of 10 are a psychological hurdle for consumers. Therefore, $9.99 seems
much cheaper than $10, and the difference between $9.99 and $10 feels greater than
the difference between $9.99 and $9.98.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 3 Hard
Topic: Pricing
65. Harry ordered a television online for $800, he was asked to pay $100 toward shipping
charges, $50 as installation charges, and another $100 for extended warranty. This
example best illustrates _____.
(p. 294)
A. bait pricing
B. internal reference pricing
C. partitioned pricing
D. multipack pricing
Partitioned pricing is setting a base price and charging extra for all other components.
Partitioned pricing works because once consumers make a decision that a certain
product is the one they want, they are very reluctant to change their mind. A number of
products are sold that way: shipping, extended warranties, installation, training,
additional services, and the like are not often included in the final price.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 3 Hard
Topic: Pricing
66.
(p. 294)
_____ is described as setting the price for an item relatively low and then charging
much higher prices for the expendables it uses.
A. Bait pricing
B. External reference pricing
C. Captive pricing
D. Odd-even pricing
In captive pricing, usually a base system is sold at a relatively low price, but the
expendables it uses are relatively expensive. Computer printers are usually priced low
for the technology—sometimes even thrown in for free when one buy's a
computer—but the cost of the replacement ink cartridges is high.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 1 Easy
Topic: Pricing
67.
(p. 294)
Ivory Isles Resort sets a low base price of $250 for its rooms. This appears to be a
great bargain for vacationers looking for resorts in the 5-star segment. However, the
customers have to pay additional charges for using services such as the casino, spa,
hot pool, gym, and the lounge. According to this information, which of the following
pricing strategies is used by Ivory Isles?
A. Captive pricing
B. Odd-even pricing
C. Going-rate pricing
D. Multipack pricing
In captive pricing, usually a base system is sold at a relatively low price, but the
expendables it uses are relatively expensive. For services, something you can offer a
low price for, such as first time membership to a health club, can be a candidate for
captive pricing. Any extra classes, sauna, massage, and the like can be higher priced
and more profitable.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 3 Hard
Topic: Pricing
68.
(p. 295)
Flying Ross Inc., a maker of world-renowned wristwatches, makes watches for three
different customer segments. Timepieces under the Gold series are priced extremely
high to cater to the high-end market, watches under the Pioneer series cater to the
mid-end market, and those under the Marvella series are priced low in order to capture
the low-end market. This strategy of setting three price points is typically referred to as
_____.
A. partitioned pricing
B. captive pricing
C. price gouging
D. price lining
Price lining is an attempt to appeal to several different markets. In this situation, one
might have three models of a product or service price to appeal to the high-, mid-, and
low-end market.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 3 Hard
Topic: Pricing
69.
(p. 295)
Saffron Spas Inc. has two membership schemes meant to attract different customer
segments. The executive membership program priced at $1000 allows for unlimited
usage of the services available in the spa chain up to a year. The premium
membership program priced at $700 allows for limited usage of the spa services up to
a year. According to this information, which of the following pricing strategies is
adopted by Saffron Spas Inc.?
A. Captive pricing
B. Partitioned Pricing
C. Price lining
D. Going rate
Price lining is an attempt to appeal to several different markets. In this situation, one
might have three models of a product or service price to appeal to the high-, mid-, and
low-end market.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 3 Hard
Topic: Pricing
70.
Which of the following is the best example for price discrimination?
(p. 295)
A. Half price for children below five years in adventure parks
B. Prices variance between high-end cars and mid-end cars
C. 10 percent rebate for a pack of three bar soaps
D. Buy nine sandwiches and the tenth one is free
Price discrimination refers to charging different prices to different groups, usually to
attract a different demographic, such as senior citizens' discounts.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 2 Medium
Topic: Pricing
71.
By adopting the pricing technique of loss leaders, a firm most likely aims to:
(p. 295)
A. attract traffic toward its products.
B. imply superior quality to a competitor.
C. signal that its products are a status symbol.
D. reward repeat customers.
The pricing technique of loss leaders involves selling a name brand at or near cost in
order to attract traffic to a retailer.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 2 Medium
Topic: Pricing
72.
(p. 295)
Smart Home, a retailer for consumer electronics, sells a reputed brand's desktops at
near cost price. These desktops are located at the end of the store so that the
customers notice the other products in the store before they pick the desktop. As a
result the sales of printers, USB devices, web cameras, and other electronic products
in the store have increased. This is an example for _____ pricing technique.
A. going rate
B. loss leaders
C. bundling
D. skimming
The pricing technique of loss leaders involves selling a name brand at or near cost in
order to attract traffic to a retailer.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 2 Medium
Topic: Pricing
73.
Penetration pricing refers to:
(p. 295)
A. charging the absolute highest possible price due to inelastic demand.
B. charging different prices to different groups to attract a different demographic.
C. setting a low price in order to get market share.
D. setting a high price to imply that a product is a status symbol.
Penetration pricing refers to setting a low price in order to get market share A later
entrant into the market may set prices below all competition in order to steal market
share.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 2 Medium
Topic: Pricing
74.
The primary goal of penetration pricing is to:
(p. 295)
A. steal competitors' market share.
B. imply that a product is a status symbol.
C. reward repeat and loyal customers.
D. attract the low-, mid-, and high-end customers.
Penetration pricing refers to setting a low price in order to get market share. A later
entrant into the market may set prices below all competition in order to steal market
share.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 2 Medium
Topic: Pricing
Scenario: Tinkle Toys, Inc.
Raven, a student at a local university majoring in psychology, has always been
fascinated by toys. So having created a business plan, she officially established her
business-Tinkle Toys. Raven is exploring various product ideas and pricing strategies
for her toy business.
75. If the toy products are initially sold at an extremely low price that just covers the costs
in order to get competitors' market share, then this pricing strategy would be know as
_____.
(p. 295)
A. penetration pricing
B. price signaling
C. price skimming
D. partitioned pricing
Penetration pricing refers to setting a low price in order to get market share A later
entrant into the market may set prices below all competition in order to steal market
share.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 3 Hard
Topic: Product
76.
(p. 296)
Shoe Pica Inc., a retailer of shoes, advertises that it is selling a particular type of
jogging shoes at a very low price of $50. These shoes are kept at the end of the store
and before reaching those shoes, customers have to walk by all the other shoes that
have many more features and better quality. Several times, this causes the consumers
to buy other better brands even though they are costlier that the one advertised. This is
a typical example for _____.
A. captive pricing
B. partitioned pricing
C. price lining
D. bait pricing
Bait pricing refers to advertising an inexpensive product and placing it near better,
more expensive models. The idea is to get the consumer to buy up. Sometimes the
product will be intentionally ugly—unpopular color, etc.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 3 Hard
Topic: Pricing
77.
(p. 296)
Blue Moss Inc. ensures that its detergent brand "Pure Plus" is always placed next to
competitors' detergents in supermarkets. This is a strategy the company uses to imply
that the same quality product is available at a better bargain. Which of the following
pricing strategies is being used by Blue Moss Inc.?
A. Price signaling
B. Price skimming
C. Reference pricing
D. Customary pricing
Reference pricing refers to displaying two similar products side-by-side in ad or at the
store but at different prices, implying the same product is available at a better price.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 3 Hard
Topic: Pricing
78.
Which of the following is the best example for random discounting?
(p. 296)
A. Christmas sale
B. Back-to-school sale
C. Happy hours in movies
D. Sale on select merchandise
Random discounting is where one run's a sale unexpectedly. Random discounts
shouldn't be too frequent because consumers begin to realize if they stock up in this
sales period, they can probably wait until the next sales period.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 2 Medium
Topic: Pricing
79.
(p. 296)
Charging lower prices at certain times to encourage customers to come during slack
periods is known as _____.
A. off-peak pricing
B. price gouging
C. price lining
D. odd-even pricing
Off-peak pricing refers to charging lower prices at certain times to encourage
customers to come during slack periods.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 1 Easy
Topic: Pricing
80.
Happy hours in amusement parks, movies, and restaurants are examples of _____.
(p. 296)
A. prestige pricing
B. off-peak pricing
C. loyalty programs
D. random discounting
Off-peak pricing refers to lowering prices during off-peak periods in order to even out
purchases, such as happy hours or late night specials at restaurants.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 1 Easy
Topic: Pricing
81. _____ is the strategy of combining two or more products in one unit and pricing it less
than if the units were sold separately.
(p. 297)
A. Skimming
B. Bundling
C. Premium pricing
D. Price signaling
Bundling refers to combining two or more products in one unit and pricing it less than if
the units were sold separately.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 1 Easy
Topic: Pricing
82.
In bonus pack pricing strategy:
(p. 297)
A.
lower prices are charged at certain times to encourage customers to come during
slack periods.
B. more than one unit of the same product are combined and sold at a low price.
C.
products are sold at different price points to attract the low-, mid-, and high-end
customers.
D.
the base item is sold at a low price and the necessary supplies are sold for a high
price.
Multiple or bonus pack pricing refers to combining more than one unit of the same
product and pricing it lower than if each unit were sold separately.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 2 Medium
Topic: Pricing
83.
(p. 297)
At Sea Shell Diner, a burger costs $4, and a pack of two cookies costs $2. The diner
also offers a combo meal consisting of the burger and cookies at $5. This pricing
strategy is an example of _____.
A. prestige pricing
B. price lining
C. off-peak pricing
D. bundling
Bundling refers to combining two or more products in one unit and pricing it less than if
the units were sold separately.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 2 Medium
Topic: Pricing
84. Shop Sure Inc. sells five bars of bathing soap for the price of four and three bottles of
room freshener for the price of two. This is an example of _____.
(p. 297)
A. price skimming
B. premium pricing
C. bonus-pack pricing
D. price signaling
A variation of bundling is selling multiple or bonus packs, such as buying five bottles of
hand lotion for the price of three. It's combining more than one unit of the same product
and pricing it lower than if each unit were sold separately.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 2 Medium
Topic: Pricing
85.
Which of the following statements is true about coupons?
(p. 297)
A. Coupons are delivered more through the Internet than in newspapers.
B. Coupons fail to serve an advertising purpose.
C. Coupons help customers remember the promoted product favorably.
D. Coupons are ineffective in attracting people to try new products.
Coupons are a great way to get people to try new products. Even if coupons aren't
redeemed, they serve an advertising purpose. Consumers see them and their brain
registers a lower price. Even if they forget to clip the coupon or use it, their
subconscious remembers the product favorably.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 2 Medium
Topic: Pricing
86.
(p. 297)
Soul pine café issues a card to each new customer on which every purchase is
stamped, and when a customer completes nine purchases, he or she gets the tenth
service for free. This is a typical example of _____.
A. a loyalty program
B. price lining
C. price bundling
D. going rate pricing
Loyalty programs are intended to tie customers to one's business. Most often, these
take the form of a card on which each purchase is stamped, and when a certain
number of purchases or visits have occurred, the customer gets a free service, a
discount, or a gift.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 2 Medium
Topic: Pricing
87. "Buy one large pizza and get a 25 percent off on the next purchase," is an example of
_____.
(p. 297)
A. partitioned pricing
B. a loyalty program
C. a referral discount
D. reference pricing
Loyalty programs are intended to tie customers to one's business. Most often, these
take the form of a card on which each purchase is stamped, and when a certain
number of purchases or visits have occurred, the customer gets a free service, a
discount, or a gift.
AACSB: Analytic
Blooms: Understand
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 2 Medium
Topic: Pricing
88. Chain Shop.com runs on a membership business model, in which an existing member
gets a 20 percent rebate if he or she introduces or invites a potential customer to the
site. This rebate gets activated once the new member makes a purchase on the site.
This is an example of _____.
(p. 298)
A. reference pricing
B. captive pricing
C. a random discount
D. a referral discount
Referral discount is a discount given to a customer who refers a friend to the business.
AACSB: Analytic
Blooms: Apply
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 2 Medium
Topic: Pricing
89.
The prices of chewing gums, candy bars are traditionally fixed at 50 cents; this limits
(p. 296) the industry from raising its prices beyond a certain level. This pricing is an example of
_____.
A. odd-even pricing
B. customary pricing
C. premium pricing
D. reference pricing
Customary pricing refers to prices based on tradition; it's very difficult to raise above
this limit. For example, penny gumball machines and 50-cent candy bars.
AACSB: Analytic
Blooms: Remember
Learning Objective: 09-06 Apply different pricing strategies
Level of Difficulty: 1 Easy
Topic: Pricing
90.
(p. 300)
Which of the following pricing strategies is considered the most aggressive from the
competition point of view?
A. Offering a sale on merchandise
B. Offering a rebate or a discount coupon to promote a product
C. Indulging in a price war
D. Pricing a product higher than the industry average
Customers recognize sales for what they are, a temporary reduction in price, and these
won't tarnish your product image. Even if the competition matches a sale or offers
some other promotion to match your offering, it's not as aggressive an action as a price
war. Your customers will feel smart about buying something at a better price, and even
if your prices are higher than the competition's and you offer a sale that brings you in
line with its pricing, customers are still likely to buy from you—all else being
equal—and feel they got a great deal.