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Name: Class: Date:
2. Wendy quit her job as the regional manager of Rubicon Inc., a multinational company, and started her own fashion
boutique. Within two years, she began earning more than what she earned during her tenure at Rubicon. Which of the
following advantages of entrepreneurship is highlighted in the given scenario?
a. Survival
b. Greater flexibility
c. Independence
d. Greater financial success
ANSWER: d
4. Which of the following categories of people is most likely to step into entrepreneurship?
a. People who have minimal knowledge about the use of technology
b. People who have trouble being subordinates because of their personalities
c. People who are skeptical about taking financial risks
d. People who lack the characteristic of self-reliance
ANSWER: b
5. Richard, an employee in an investment firm, was dissatisfied with the way his superiors handled business dealings. For
that reason, he quit his job and started his own business so that he is able to make all management decisions without
interference from anyone. Which advantage of entrepreneurship is highlighted in the given scenario?
a. Greater financial success
b. Independence
c. Uniformity
d. Greater challenge
ANSWER: b
6. Maude worked as a lead animator in an animation company. However, she could not exercise her freedom while
working on projects because she was bound by the decisions made by the company. Fed up with this, Maude quit her job
and started an independent animation firm where she accepts only those projects that allow her a free rein in terms of
creativity. In the given scenario, Maude most likely started her own firm because it offered _____.
a. independence
b. uniformity
c. greater challenge
d. greater financial success
ANSWER: a
8. Suresh quits his nine-to-five job at a multinational company and starts his own event management company. In his new
company, he does not practice a nine-to-five work regime. Instead, he organizes meetings with clients by making
appointments that favor his schedule. Which of the following advantages of entrepreneurship is highlighted in the given
scenario?
a. Greater challenge
b. Survival
c. Greater financial success
d. Flexibility
ANSWER: d
9. Who among the following is the most appropriate person to start his or her own venture?
a. Gita, who has been an event manager for five years but discontinues her job as she wants to spend enough
time with her one-year-old child
b. Linda, who has been working as an assistant manager for over a year but cannot make decisions on her own
c. Mira, who is intolerant of uncertainty and becomes emotionally depressed at the sign of any form of financial
distress in her family
d. Laura, who is against approaching others for funds and only has enough savings to keep her business afloat for
one year
ANSWER: a
10. Neman, a single parent, quit his job and started a small independent business because he was unable to give adequate
attention to his child. Being an entrepreneur gives him the freedom to give undivided attention to his child without
jeopardizing his work. Which of the following advantages of entrepreneurship is highlighted in the given scenario?
a. Greater financial success
b. Flexibility
c. Greater challenge
d. Survival
ANSWER: b
12. Jenifer owns a bakery that specializes in preparing extravagant wedding cakes. She is a sought-after baker because of
the quality and finesse of her products. Jenifer believes that the pressure of living up to the expectations of her customers
and delivering quality products always keeps her on the edge and helps her to deliver her best. Which of the following
advantages of entrepreneurship is highlighted in the given scenario?
a. Challenge
b. Independence
c. Survival
d. Flexibility
ANSWER: a
13. Paul worked as an artisan at a furniture company where a set of artisans were required to produce a specific part of a
product, and the product was later assembled. Paul quit his job and started a small furniture business where he crafts
unique products based on the demands of his customers. He feels that the constant need to adapt and outperform himself
keeps him focused and motivated to improve his craft. Which advantage of entrepreneurship is highlighted in the given
scenario?
a. Greater financial success
b. Survival
c. Greater tractability
d. Challenge
ANSWER: d
14. In the event that a large company has to downsize, the middle-aged workers who are laid off find it difficult to find
new jobs. When such workers decide to start their own businesses, they:
a. become welfare recipients.
b. are called necessity entrepreneurs.
c. become post-retirement workers.
d. are called baby boomers.
ANSWER: b
15. Raoul is an illiterate who does not have proper skills for any job. As a result, he is unable to find permanent
employment. As a last resort, Raoul starts a diner in his home to earn a regular income for his family. In the given
scenario, Raoul most likely started the diner because it offered _____.
a. greater flexibility
b. a challenge
c. a chance of survival
d. independence
ANSWER: c
16. Who among the following people is most likely to become a necessity entrepreneur?
a. A person who has recently graduated from college and has no work experience
b. A person who has recently been promoted to a managerial position
17. Felix lost his job at an investment firm because of downsizing during a period of recession. To keep himself
financially stable, he opened a food truck that became a huge success. Which of the following advantages of
entrepreneurship initially motivated Felix to start the food truck?
a. Survival
b. Independence
c. Flexibility
d. Challenge
ANSWER: a
18. Michael is a middle-aged professional who lost his job five months ago when his former employer downsized. He has
actively been looking for work ever since but has not been able to find a job that utilizes his abilities or offers an income
similar to his previous position. He is beginning to realize that the only way for him to survive his current situation is to
start his own business. In this scenario, Michael will most likely become a(n) _____.
a. venture capitalist
b. angel investor
c. necessity entrepreneur
d. baby boomer worker
ANSWER: c
19. Xavi develops a cell phone battery that can be charged by a solar panel and can run efficiently for up to three hours.
His friends point out that it would be difficult to get cell phone manufacturers to adopt this new technology and that it
could take a long time for people to start relying on it. However, Xavi is convinced that he can make his idea popular and
successful. He plans to start a new company called EnerMob Inc. that would promote and sell the cell phone battery to the
public. In this scenario, which of the following entrepreneurial characteristics is Xavi demonstrating?
a. Vision
b. Hindsight
c. Retrospection
d. Reflection
ANSWER: a
20. James is always keen on putting his ideas into action regardless of the outcome. He perfects his craft by trying out
different possibilities. If he is dissatisfied with the result, he tries out a different method but does not give up. Which
entrepreneurial characteristic is highlighted in the given scenario?
a. Docility
b. Self-reliance
c. Vision
d. Conformity
ANSWER: c
21. Ophelia opened a boutique that specializes in creating custom trousseaux for brides. She conceived the idea in her
senior year at school, and despite receiving criticism for the idea, she went ahead and opened the boutique. Which
entrepreneurial characteristic is highlighted in the given scenario?
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a. Self-reliance
b. Vision
c. Energy
d. Conformity
ANSWER: b
22. Charles owns a restaurant that is thematically modeled into representing the pop culture of the 1980s. While setting up
the restaurant, Charles took care of everything himself, from interior decoration to menu and music. He even got the
permit for the restaurant himself. Which entrepreneurial characteristic is highlighted in the given scenario?
a. Conformity
b. Subservience
c. Vision
d. Self-reliance
ANSWER: d
23. Melissa runs a small restaurant that specializes in serving continental cuisine. Every Sunday, she visits the farmers'
market to buy the ingredients for her dishes. She handpicks each item to maintain the quality of her food. Which
entrepreneurial characteristic is highlighted in the given scenario?
a. Vision
b. Self-reliance
c. Docility
d. Confidence
ANSWER: b
24. In the context of entrepreneurs, which of the following statements is a difference between an internal locus of control
and an external locus of control?
a. An internal locus of control is an entrepreneurial trait, whereas an external locus of control is not.
b. An internal locus of control does not involve self-reliance, whereas an external locus of control does.
c. An internal locus of control involves personal responsibility, whereas an external locus of control does not.
d. An internal locus of control is not applicable in market niches, whereas an external locus of control is.
ANSWER: c
25. _____ is a deep-seated sense that forces other than the individual are responsible for what happens in his or her life.
a. An external locus of control
b. Tolerance of uncertainty
c. An internal locus of control
d. Tolerance of failure
ANSWER: a
ANSWER: d
27. Which of the following statements is true of people with an external locus of control?
a. They are extremely self-reliant.
b. They validate their own efforts.
c. They take complete control of their lives.
d. They feel buffeted by the actions of others.
ANSWER: d
28. Samuel has an innovative idea for better disposal of garbage. Hence, he starts a business to implement this idea that he
believes will succeed. He is also aware of the risks involved in starting the business. However, Samuel puts in only six
hours a day into building his business. Some days, he finds it difficult to put in any time at all. Which of the following
entrepreneurial characteristics does Samuel lack?
a. Energy
b. Confidence
c. Tolerance of uncertainty
d. Self-reliance
ANSWER: a
29. Lester owns a small law firm and has a 10-hour workday. Despite keeping long hours, he is open to working on
weekends and holidays if required. He also responds to late-night calls from clients. Which of the following
entrepreneurial characteristics is highlighted in the given scenario?
a. Energy
b. Confidence
c. Vision
d. Self-reliance
ANSWER: a
30. Lowell runs a unisex salon and has six 10-hour workdays. If a customer requests him to stay open on the seventh day,
he always obliges. He also provides home services if requested. Which entrepreneurial characteristic is most likely
highlighted in the given scenario?
a. Self-reliance
b. Confidence
c. Energy
d. Vision
ANSWER: c
31. Howard is a young entrepreneur who has invested in creating a new form of social media. He is sure of his idea and
believes that it will be successful in the long run. However, he is careful not to be overoptimistic about it and works on
other ideas as well. In the given scenario, which of the following statements is true of Howard?
a. He has an external locus of control.
b. He is docile.
c. He is a conformist.
d. He is confident but not overconfident regarding his abilities.
ANSWER: d
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34. Which of the following statements is true of entrepreneurs who are tolerant of uncertainty?
a. They do not accept financial risk willingly.
b. They view the world in shades of gray.
c. They never stake their reputation on the success of an unproven product.
d. They are not self-reliant but are extremely confident.
ANSWER: b
35. Priscilla is a trader of silver and diamond jewelry. Due to a recessionary trend in the industry, her business has not
been making any profits for a few months. As the end of this economic trend cannot be easily ascertained, she decides to
get her house mortgaged so that she can add a new line of business of trading in semi-precious stones. This financial risk
appetite of Priscilla illustrates her _____ as an entrepreneur.
a. high energy levels
b. tolerance of uncertainty
c. tolerance of failure
d. deep visionary sense
ANSWER: b
36. Which of the following statements is true of entrepreneurs who possess tolerance of failure?
a. They do not accept financial risk willingly.
b. They tend to view nonsuccess as a chance to learn.
c. They never stake their reputation on the success of an unproven product.
d. They often name themselves losers when they fail.
ANSWER: b
37. Julian wants to open a bakery. He uses his savings and borrows some funds from his family to start his business. In the
given scenario, Julian uses _____ to fund his business.
a. venture capital
b. crowdfunding
c. commercial loans
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d. personal resources
ANSWER: d
38. Ruben owns an astronomy-themed restaurant. The entire restaurant resembles a planetarium. He has also installed a
projector that transforms the ceiling into a night sky. Ruben used most of his savings to fund this venture and also
borrowed funds from his friends and family. In the given scenario, Ruben used _____ to fund his business.
a. crowdfunding
b. commercial loans
c. personal resources
d. venture capital
ANSWER: c
39. According to small business experts, while raising start-up funds from friends and relatives, it is:
a. acceptable to not repay them.
b. essential to involve them in company dealings.
c. acceptable to not document the financing.
d. essential to keep the relationship as professional as possible.
ANSWER: d
40. Mabel has a business idea of starting a store that would only sell hair products. Although she needs to raise capital to
start her business, she does not want to share the ownership of her firm with anyone else. With a good appetite for risk,
which of the following financing resources would be most ideal for her to start her business?
a. Personal credit cards
b. Angel investors
c. Venture capital firms
d. Microloan program from the U.S. Small Business Administration
ANSWER: a
41. Small business start-ups are likely to find that getting commercial loans are:
a. difficult because lenders are reluctant to give loans to firms that do not have a track record.
b. one of the most flexible ways of obtaining financing because local bankers are usually eager to establish
relationships with new companies.
c. the most difficult because start-ups require higher financing than what banks can offer.
d. the best way to obtain all the financing they need as lenders usually get an ownership stake in the companies.
ANSWER: a
42. Runion Bank is well-known for providing funds to start-ups. The bank lends money to an entrepreneur at an interest
rate of 5%, which is to be repaid only after the business earns a sizable profit. If the business fails, then only the primary
amount needs to be returned. In the given scenario, which of the following statements is true of Runion Bank?
a. It is a venture capital firm.
b. It is an angel investor.
c. It provides loans to entrepreneurs.
d. It helps entrepreneurs in the process of crowdfunding.
ANSWER: c
44. In the context of funding options for small businesses, the _____ assists entrepreneurs by partially guaranteeing loans
from local commercial lenders.
a. Federal Reserve
b. Patent and Trademark Office
c. U.S. Small Business Administration
d. Department of the Treasury
ANSWER: c
45. In the context of funding options for small businesses, which of the following offers a potential funding source for
new business start-ups?
a. Peer-to-peer lending
b. A buy-sell agreement
c. A treasury bill
d. Token money
ANSWER: a
46. _____ is the process of funding ventures by raising money from a large number of investors via the Internet.
a. Microloan programing
b. Crowdfunding
c. Activity-based costing
d. Backscratching
ANSWER: b
47. In the context of protecting your start-up, _____ means using metrics, creative strategies, and state-of-the-art
technology to accelerate the advancement of your brand, service, or product far beyond the norm.
a. growth hacking
b. crowdfunding
c. activity-based costing
d. backscratching
ANSWER: a
48. In the context of protecting your start-up, which of the following statements is true of growth hackers?
a. They know their customers inside and out.
b. They restrict the creation of blogs.
c. They prevent customers from participating in conversations related to a brand.
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49. Maurice wants to make a documentary film on the unequal distribution of money in the world and its effect on
different social classes. Instead of approaching a production house, he creates a website for the project where he pitches
his idea through a short video and requests the viewers to donate any amount of money to cover the production cost. In the
given scenario, which of the following is Maurice using to get the capital for his film?
a. A venture capital firm
b. An angel investor
c. Crowdfunding
d. Seed money
ANSWER: c
50. Which of the following is one of the largest crowdfunding sites in terms of traffic?
a. Futurelearn.com
b. Cesim.com
c. Gofundme.com
d. Businessinsider.com
ANSWER: c
51. Herbert gained most of the capital for his new start-up project by posting a small demonstration of his product on a
website that he created especially for the project. Many people showed genuine interest in his product and donated money
to help him launch it. In the given scenario, Herbert:
a. received money for his venture through crowdfunding.
b. received money for his venture from angel investors.
c. was able to fund his project through venture capital.
d. was able to fund his project through seed money.
ANSWER: a
52. In the context of various funding options for small businesses, which of the following statements is a difference
between angel investors and venture capital firms?
a. Angel investors fund only nonprofits, whereas venture capital firms do not fund nonprofits.
b. Angel investors include private organizations, whereas venture capital firms include only government
organizations.
c. Angel investors focus on start-ups in their later stages, whereas venture capital firms focus on low-potential
start-ups.
d. Angel investors are wealthy individuals, whereas venture capital firms are companies.
ANSWER: d
54. Robert wants to start an independent recording studio. In order to finance his start-up, Robert seeks help from Esther,
a successful business magnate. Esther agrees to fund Robert's venture as long as she receives a 20% share of the profits
made by Robert. In the given scenario, Robert receives the financial resources to start his business:
a. from a venture capital firm.
b. through crowdfunding.
c. though a commercial loan.
d. from an angel investor.
ANSWER: d
55. Richard is a wealthy and successful businessman who is well known for financing many successful start-ups. He has
earned a sizable amount of profit by providing capital to start-ups in return for a share of their profits. In the given
scenario, which of the following statements is true of Richard?
a. He provides venture capital to start-ups.
b. He provides commercial loans to start-ups.
c. He is a general partner.
d. He is an angel investor.
ANSWER: d
56. Which of the following funding options provides advice and guidance to start-up businesses along with the funds?
a. Crowdfunding
b. Venture capital
c. Treasury bills
d. Promissory notes
ANSWER: b
57. Which of the following statements is true of funding options for small businesses?
a. Only 40% of new business owners launch with commercial loans.
b. Only a tiny fraction of new businesses receive any venture capital money.
c. The U.S. Small Business Administration gives free money to start-up businesses.
d. Angel investors invest in start-ups without requiring a share of ownership.
ANSWER: b
58. Jacob is in urgent need of financing for his rapidly-growing online travel business Travelmunch. As Jacob does not
usually pay off his loans on time, his credit score is very low. He feels overwhelmed and thinks that it would be ideal if he
receives some guidance on how to run the business. Given his situation, which of the following key sources of funding
would be ideal for Jacob?
a. A commercial bank loan
b. A venture capital firm
c. An initial public offering
d. A U.S. Small Business Administration loan
ANSWER: b
59. Gemini Inc., a large conglomerate, offered Timothy's new logistics company the much required financial support in
exchange for a 40% ownership in the company. It also provided Timothy with an experienced group of people to help him
60. Nestor wants to open a new event management company. Deveon, a multinational company, agrees to fund his
business on the condition that Deveon be given 50% ownership in the company. In the given scenario, Deveon is most
likely a(n) _____.
a. commercial lender
b. sole proprietor
c. venture capital firm
d. angel investor
ANSWER: c
61. Loren LLC is a small bicycle store that competes effectively with much larger companies as its focus lies exclusively
on selling bicycles for senior citizens and patients with orthopedic ailments. The company has been successful as it has:
a. exploited a small but profitable market niche.
b. worked to undercut larger competitors.
c. attracted the best talent in the bicycle market.
d. acquired a patent for its bicycles.
ANSWER: a
62. Mauve starts a business that specializes in procuring and selling antique items. Her business caters specifically to
individuals who have high-income jobs and who like collecting unique artifacts. Mauve does not have much competition
and can decide the prices of her products without any external influence. The opportunity of _____ is highlighted in the
given scenario.
a. providing personal customer service
b. exploiting market niches
c. using technology
d. having lower overhead costs
ANSWER: b
63. Rahul owns a guitar store that is famous for customizing guitars. From choosing the wood for the body to the type of
pickups, everything can be selected by the customer. This feature attracts beginners and professionals alike to Rahul's
store. The specific nature of the business makes it unique and results in fewer competitors. This allows Rahul to choose
the prices for his services. The opportunity of _____ is highlighted in the given scenario.
a. exploiting market niches
b. having lower overhead costs
c. providing homogenous service
d. using technology
ANSWER: a
64. Vincent runs a small company that manufactures hand-stitched custom leather shoes for men. His products generally
65. Tina owns a workshop that specializes in making intricate wooden decorative items. She makes scale models of most
of the existing objects around the world. She faces virtually no competition in her business and thus enjoys a stable
growth. The opportunity of _____ is highlighted in the given scenario.
a. providing personal customer service
b. having lower overhead costs
c. using technology
d. exploiting market niches
ANSWER: d
66. In the context of small business opportunities, which of the following statements is true of market niches?
a. They tend to have many competitors.
b. They fail to offer enough potential for small, specialized companies.
c. They tend to be quite attractive to small firms.
d. They are high-profile enough for large firms.
ANSWER: c
67. In the context of small business opportunities, because of their size, many small firms can:
a. offer personal customer service.
b. have a large span of control.
c. evade compliance with federal regulations.
d. offer health coverage to their employees at a lower cost than large firms.
ANSWER: a
68. Rudy, a food truck owner, has sizable followers on his website where he personally interacts with them and thanks
them for their support. He also lets his followers know his location and the menu for a day in advance. The opportunity of
_____ is highlighted in the given scenario.
a. having lower overhead costs
b. providing personal customer service
c. exploiting market niches
d. using technology
ANSWER: b
69. Nuno owns a recording studio with high-quality equipment. He allows artists to schedule sessions based on their
flexibility, and he also allows them to bring their own sound engineer and work with him or her to achieve the desired
result. As a result, his customers frequent his studio and recommend it to their friends and colleagues. The opportunity of
_____ is highlighted in the given scenario.
a. using technology
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70. Bertha runs a fashion boutique. She prefers to personally interact with her customers to gauge the styles that would
suit their personality. Her customers also prefer talking to her in person to share their preferences in colors, designs,
styles, and fabric as they value her suggestions. The opportunity of _____ is highlighted in the given scenario.
a. having lower overhead costs
b. using technology
c. exploiting market niches
d. providing personal customer service
ANSWER: d
71. Luis runs a bakery that offers only takeaway service. His customers visit his residence and watch him prepare their
order. They also get an opportunity to bring their cake designs and help Luis prepare the desired cake. As a result, he
knows most of his customers well. The opportunity of _____ is highlighted in the given scenario.
a. providing personal customer service
b. having lower overhead costs
c. using technology
d. exploiting market niches
ANSWER: a
72. In the context of opportunities and threats, overhead costs for small businesses:
a. tend to be much higher than large businesses.
b. are about the same as big companies.
c. are often lower than big companies.
d. tend to decrease as they grow bigger in size.
ANSWER: c
73. When entrepreneurs of small firms start serving a variety of roles, from CEO to customer service rep, such firms:
a. have a large span of control.
b. are able to offer health coverage to their employees at a lower cost than large firms.
c. have lower overhead costs.
d. are able to evade compliance with federal regulations.
ANSWER: c
74. Robert started his company in his parents' garage because he could not afford to rent an office space. Most of his
finances were spent on procuring the essential items to set up his company. As a result, he was able to save funds for the
future. The opportunity of _____ is highlighted in the given scenario.
a. exploiting market niches
b. using technology
c. having lower overhead costs
d. providing personal customer service
ANSWER: c
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75. Olivia runs a spa for women. She employs only two helpers and one receptionist. This enables her to focus most of her
resources on procuring products required to provide comfort and high-quality services to customers. The opportunity of
_____ is highlighted in the given scenario.
a. providing personal customer service
b. using technology
c. exploiting market niches
d. having lower overhead costs
ANSWER: d
76. James employs an apprentice in his guitar store who gets firsthand knowledge of craftsmanship and the process
involved in becoming a professional luthier. This allows James to have a reliable hand who can assist him in his work
without requiring him to hire a professional luthier. It also enables him to use his financial resources on procuring high-
quality materials to make the guitars. The opportunity of _____ is highlighted in the given scenario.
a. having lower overhead costs
b. exploiting market niches
c. using technology
d. providing personal customer service
ANSWER: a
77. Rachel runs a fashion boutique. She employs five seamstresses to help her in her work. She gives them flexible work
hours and usually allows them to work from their respective homes. However, Rachel does not provide health-care
facilities to her employees, and instead, she uses the financial resources to buy high-quality fabrics. The opportunity of
_____ is highlighted in the given scenario.
a. exploiting market niches
b. using technology
c. having lower overhead costs
d. providing personal customer service
ANSWER: c
78. Michael wants to launch a new product. He creates a website specifically for this on the Internet and uploads a short
video demonstration of his product on the website. He also appeals to the viewers to make donations to help him start
production. People respond well to his idea and help him collect enough financial resources to start his business. The
opportunity of _____ is highlighted in the given scenario.
a. exploiting a market niche
b. providing personal customer service
c. having lower overhead costs
d. using technology
ANSWER: d
79. Herbert uses prominent social media websites to promote his newly opened restaurant. He constantly posts
promotional offers and provides coupons that customers can redeem to avail discounts when they dine in the restaurant.
The opportunity of _____ is highlighted in the given scenario.
a. providing personal customer service
b. using technology
c. having lower labor costs
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80. Angela runs a fashion boutique for women. Her customers can use an online editing software to create a rough image
of the design and style they want Angela to use. The opportunity of _____ is highlighted in the given scenario.
a. using technology
b. having lower overhead costs
c. providing homogenous service
d. exploiting market niches
ANSWER: a
81. Caroline owns an online jewelry store. She has developed a smartphone application for her business that allows her
customers to take their pictures and try out virtual jewelry over those pictures before placing the orders. The opportunity
of _____ is highlighted in the given scenario.
a. providing personal customer service
b. having lower overhead costs
c. using technology
d. exploiting market niches
ANSWER: c
82. Which of the following is a threat that a small business is most likely to face?
a. Unavailability of technology
b. Incompetent customer service
c. High risk of failure
d. High overhead costs
ANSWER: c
83. Ronit has been involved in many start-up projects. However, none of his ventures have been successful because of
severe competition in the market and personal issues such as poor health and lack of dedication. Which of the following
threats is highlighted in the given scenario?
a. Too little money
b. Lack of knowledge
c. High risk of failure
d. Bigger regulatory burden
ANSWER: c
84. Brian had started a new business venture using majority of his savings. However, his divorce affected him monetarily
because of which he had to shut down his business. Which of the following threats is highlighted in the given scenario?
a. Bigger regulatory burden
b. High risk of failure
c. Too little money
d. Lack of knowledge
ANSWER: b
85. Margie dropped out of college to pursue her passion for cooking. With personal resources to fund her initial capital,
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86. Mohit is very passionate about music and opens a recording studio of his own. However, he does not know much
about running a business and within a short period, starts running into losses. Therefore, he shuts down the business.
Which of the following threats is highlighted in the given scenario?
a. Too little money
b. Higher health insurance costs
c. Bigger regulatory burden
d. Lack of knowledge
ANSWER: d
87. Rosa has several creative ideas for organizing events and starts an event management company. However, with little
knowledge about running a business, she is unable to handle the finance and marketing sides of the business. As a result,
she faces huge losses and eventually shuts down the company. Which of the following threats is highlighted in the given
scenario?
a. Lack of knowledge
b. Too little money
c. Bigger regulatory burden
d. Higher health insurance costs
ANSWER: a
88. Timothy wanted to start a coffeehouse. However, he could not buy a space to start his business because of lack of
funds. Which of the following threats is highlighted in the given scenario?
a. Bigger regulatory burden
b. High risk of failure
c. Too little money
d. Lack of knowledge
ANSWER: c
89. David wants to open a new gymnasium with state-of-the-art equipment and qualified trainers. However, he can only
afford either of the two. He decides to get the equipment first to start the gym. However, without qualified trainers to
operate the equipment, David loses his customers and is forced to shut down the gym. Which of the following threats is
most likely highlighted in the given scenario?
a. High risk of failure
b. Too little money
c. Lack of knowledge
d. Bigger regulatory burden
ANSWER: b
91. Deborah dreams of owning a pub in the heart of the city that she lives in. Deborah has the music, ideas, and menu in
place, and the funds required to start the pub. Which of the following suggestions is most likely to help Deborah realize
her dream?
a. Deborah should buy a pub that is already established.
b. Deborah should start from scratch.
c. Deborah should buy a franchise of a well-known pub.
d. Deborah should sell her ideas to wealthy pub owners.
ANSWER: b
94. Which of the following statements is true of starting a business from scratch?
a. It is hard to get credit from both lenders and suppliers.
b. It results in high overhead costs.
c. The ongoing percent-of-sales royalty fee can be very high.
d. There is no scope for creativity.
ANSWER: a
95. Buying an established business is a better plan than starting your business from scratch because:
a. you have more creative freedom.
b. you can choose your stakeholders.
c. the organizational structure is in place.
d. the chance of first-year failure is zero.
ANSWER: c
97. Natalie is a professional baker who dreams of owning her own cake business. She does not have any ideas or concepts
for starting a cake shop, but her wealthy uncle is ready to fund her initial capital. Natalie's risk appetite is low and she
wants to run a business that has less than 10 percent chances of first-year failure. Which of the following could be the best
solution for Natalie to pursue her dream of owning a cake shop?
a. Starting her own cake shop from scratch
b. Buying an established cake shop in town
c. Buying a cake shop franchise
d. Enrolling in a business school
ANSWER: c
100. In the context of becoming a successful small business owner, which of the following is a good rule to follow?
a. Developing a business owner's directory after consulting a recent business management graduate
b. Approaching venture capital firms to seek funds instead of going to personal financing resources
c. Delaying business promotion until you have recovered all the investments
d. Getting roughly three years of experience working for someone else in the field that interests you
ANSWER: d
101. Ethan is in the process of launching his new business venture that specializes in electronic waste recycling. During
this period, he has been in constant touch with Lois Inc., who has seen success in this niche market. In this scenario,
which of the following entrepreneurial development strategies is Ethan utilizing?
a. Developing a business plan
b. Accessing the U.S. Small Business Administration resources
c. Fueling innovation
d. Learning from others
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ANSWER: d
102. Which of the following pieces of information is found in the U.S Small Business Administration (SBA) resources?
a. Health tips for entrepreneurs
b. Industry-specific statistics
c. Updates on multibillion-dollar business regulations
d. Tips on making a company public
ANSWER: b
103. _____ are local offices—affiliated with the U.S Small Business Administration—that provide comprehensive
management assistance to current and prospective small business owners.
a. Small Business Development Centers
b. Small Business Incubation Offices
c. Small Business Advancement Stations
d. Small Business Creation Sites
ANSWER: a
104. The Small Business Administration (SBA) supports the _____, which provides free, comprehensive counseling for
small businesses from qualified volunteers.
a. Service Corps of Retired Executives
b. Center for Strategic and International Studies
c. American Veterans Center
d. Humane Society of the United States
ANSWER: a
105. A _____ is a formal document that describes a business concept, outlines core business objectives, and details
strategies and timelines for achieving those objectives.
a. business warrant
b. business resource
c. business directory
d. business plan
ANSWER: d
106. In the context of the various strategies that can help a small business owner succeed, a _____ provides an invaluable
way to keep an entrepreneur and his or her team focused on success; it is also absolutely crucial for obtaining outside
funding.
a. business warrant
b. business resource
c. business directory
d. business plan
ANSWER: d
108. In the context of the statistics provided by the U.S. Small Business Administration (SBA), _____.
a. small businesses comprise 15.5% of all businesses in the United States
b. the opening of new businesses has accounted for over 40% of net new jobs in the U.S. economy over the past
two decades
c. small businesses comprise 49.5% of all businesses in the United States
d. the opening of new businesses has accounted for over 80% of net new jobs in the U.S. economy over the past
two decades
ANSWER: b
109. According to the U.S. Small Business Administration (SBA), to officially count as "small," _____.
a. a business should have at least 500 employees, excluding the self-employed
b. the average revenue of a business should range from $0.75 million to $28.5 million
c. the number of employees of a business should range from fewer than 50 to 100
d. the average revenue of a business should be between $30 million and $40 million
ANSWER: b
110. Beyond the sheer value of the goods and services they generate, small businesses make a powerful contribution to the
U.S. economy in terms of:
a. merging billion-dollar corporations.
b. powering the stock market.
c. creating new jobs.
d. accounting for all private sector output.
ANSWER: c
111. Which of the following is a powerful contribution made by small businesses to the U.S. economy?
a. Mergers of billion-dollar corporations
b. Powering the stock market
c. Vitalizing inner cities
d. Accounting for all private sector output
ANSWER: c
113. Small firms tend to be effective innovators for a number of reasons. Most importantly, their very reason for being
often ties to:
a. a brand-new idea.
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114. In the context of the U.S. economy, which of the following statements is true of small businesses?
a. They are less likely to develop revolutionary new ideas.
b. They have a wider span of control than large businesses.
c. They are often the last to contract when times are tough.
d. They often display a refreshing lack of bureaucracy.
ANSWER: d
115. According to the Global Entrepreneurship Monitor (GEM), the most effective way to evaluate entrepreneurship
levels is by phase. A country's total early-phase entrepreneurship rate includes the:
a. percentage of adults who have been running their own business from three months to 3.5 years.
b. number of middle-aged workers who have turned into necessity entrepreneurs after being laid off from their
corporate jobs.
c. percentage of millennials who have decided to start their own venture after retirement.
d. number of adults who have proven their entrepreneurship capabilities despite repeated failures.
ANSWER: a
117. Which of the following statements is true of necessity entrepreneurship in high-income countries?
a. The rate of necessity entrepreneurship is low.
b. The risks of necessity entrepreneurship are low.
c. Necessity entrepreneurship is a major contributor to the nation's economy.
d. Necessity entrepreneurship occurs when there are several sources of income.
ANSWER: a
118. The sense of urgency regarding entrepreneurship tends to fall when fear of failure is low. This most likely happens in
countries where:
a. there is a low level of employment protection.
b. a person is given financial support if he or she gets fired.
c. limited personal resources are available.
d. strict business regulations are set by the government.
ANSWER: b
119. The nation of Rhodasia has the lowest entrepreneurship rate globally. A new government, headed by President
Harold David Wengerd, aims to make the country's business environment more supportive toward burgeoning
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120. A thriving cowboy culture encourages entrepreneurship. The term "cowboy culture" refers to a culture where:
a. strict regulations lead to the creation of joint ventures between large corporations and nonprofits.
b. standout individuals who break free of old ways attract attention and admiration in many of the countries with
high entrepreneurship rates.
c. it is mandatory for all businesses to provide health insurance to employees.
d. the employment protection laws established by the government motivate people to turn into necessity
entrepreneurs when the need arises.
ANSWER: b
121. In the context of launching a new venture, the prime age for entrepreneurship is late 40s to early 50s.
a. True
b. False
ANSWER: False
122. For entrepreneurs, there is no correlation between dollars earned and hours worked.
a. True
b. False
ANSWER: False
123. Some businessmen, called necessity entrepreneurs, launch their business because they believe it is their only
economic option.
a. True
b. False
ANSWER: True
124. When entrepreneurs develop new products that we didn't even know we needed until we had them, they are showing
the entrepreneurial characteristic of vision.
a. True
b. False
ANSWER: True
126. In the context of self-reliance, when things go well, people with an internal locus of control feel that the actions of
other people have led to their success.
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a. True
b. False
ANSWER: False
127. In the context of self-reliance, people with an external locus of control rely more on their own efforts and less on the
actions of others.
a. True
b. False
ANSWER: False
128. External locus of control is a deep-seated sense that the individual is personally responsible for what happens in his
or her life.
a. True
b. False
ANSWER: False
129. Dominic feels that an incredible string of bad luck has affected his personal life. He also feels that his boss is
subjecting him to unfair treatment at work for no fault of his. Dominic's perceptions suggest that he has an internal locus
of control.
a. True
b. False
ANSWER: False
130. The U.S. Small Business Administration (SBA) gives free money to start-up businesses.
a. True
b. False
ANSWER: False
131. The U.S. Small Business Administration (SBA) gives interest-free loans to start-up businesses and fully guarantees
loans from local commercial lenders.
a. True
b. False
ANSWER: False
132. The U.S Small Business Administration (SBA) microloan program lends an average of $50,000 to start-up
businesses through community nonprofit organizations.
a. True
b. False
ANSWER: False
133. Ted's new company is experiencing a steady decline in profit. He needs external financing to prevent his company's
profits from declining further. Considering the fact that he wants to exercise sole ownership and control over the firm for
as long as possible, Ted is likely to find angel investors who are interested in helping him meet his financial needs.
a. True
b. False
ANSWER: False
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134. Small businesses often have an advantage in foreign markets where customers want to deal directly with a company's
top management.
a. True
b. False
ANSWER: True
135. Rudy owns a small metal fabrication business that employs 23 workers. As the owner of a small business, one of the
major advantages that Rudy enjoys while competing with larger firms is reduced burden of complying with government
regulations.
a. True
b. False
ANSWER: False
136. Administrative costs for small health plans are much higher for large firms making it tougher for small firms to offer
coverage to their employees.
a. True
b. False
ANSWER: True
137. An advantage of starting a business from scratch is that the entrepreneur has the freedom to use his or her own ideas
and concepts.
a. True
b. False
ANSWER: True
139. The Global Entrepreneurship Monitor (GEM) shows that people living in high-income countries tend to be much
more willing to start their own businesses than people living low-income countries.
a. True
b. False
ANSWER: False
140. Based on statistics from the U.S. Small Business Administration, small businesses comprise 49.9% of all businesses
in the United States.
a. True
b. False
ANSWER: False
141. Based on statistics from the U.S. Small Business Administration (SBA), small businesses account for 78% of all
private sector employees.
a. True
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b. False
ANSWER: False
142. For research purposes, the U.S. Small Business Administration (SBA) defines small business as companies with up
to 1000 employees.
a. True
b. False
ANSWER: False
143. In the context of the U.S. economy, small firms tend to be effective innovators because of the presence of
revolutionary new ideas.
a. True
b. False
ANSWER: True
144. Small businesses generate 50% of total employment in American inner cities.
a. True
b. False
ANSWER: False
145. In the context of small businesses and the economy of a country, entrepreneurship rates are significantly lower in
countries where it is hard to get fired.
a. True
b. False
ANSWER: True
146. Describe any two basic qualities that define successful entrepreneurs.
ANSWER: Answers will vary. Two basic qualities that define successful entrepreneurs are tolerance of uncertainty and
tolerance of failure.
Tolerance of Uncertainty:
More often than others, entrepreneurs see the world in shades of gray, rather than simply black and white.
They tend to embrace uncertainty in the business environment, turning it to their advantage rather than shying
away. Uncertainty also relates to risk, and successful entrepreneurs tend to more willingly accept risk—
financial risk, for instance, such as mortgaging their home for the business, and professional risk, such as
staking their reputation on the success of an unproven product.
Tolerance of Failure:
Even when they fail, entrepreneurs seldom label themselves losers. They tend to view failure as a chance to
learn, rather than as a sign that they just can't do it (whatever "it" may be for them at any given moment).
Failure can actually be an effective springboard for achievement.
147. Peter decides to open a large store that sells organic farm products, but he is unsure about how to obtain the funding
he needs to get started. He calculates the start-up funding that he will need as $50,000. What type of funding would be
appropriate for this type of business? What are the advantages and disadvantages of this type of funding?
ANSWER: Answers will vary. Peter can get funding from personal resources. Most new firms typically tap personal
resources such as family, friends, and credit cards. According to Consumer Reports, 68 percent of total start-
up financing comes from personal resources. If individuals do borrow from family or friends, virtually every
small business expert recommends that they keep the relationship as professional as possible. If the business
fails, a professional agreement can preserve personal ties. And if the business succeeds, they will need top-
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quality documentation of financing from family and friends to get larger-scale backing from outside sources.
Peter can get a credit card from his banker. A personal credit card can be especially handy—though highly
risky—financing resource. In fact, a recent survey found that nearly half of all start-ups are funded with
plastic. Credit cards do provide fast, flexible money, but if individuals do not pay their card companies fast,
they will find themselves socked with financing fees that can take years to pay off.
148. Identify and describe two opportunities and two threats pertaining to the success of small businesses.
ANSWER: Answers will vary. Most small businesses enjoy a number of advantages as they compete for customers. But
they also must defuse a range of daunting potential threats to succeed long term.
Opportunities:
Market Niches: Many small firms are uniquely positioned to exploit market niches. These sparsely occupied
spaces in the market tend to have fewer competitors because they simply aren't big enough—or high enough
profile—for large firms. They nonetheless offer more than enough potential for small, specialized companies.
Personal Customer Service: With a smaller customer base, small firms can develop much more personal
relationships with individual customers. The personal touch can be especially beneficial in some foreign
markets, where clients prize the chance to deal directly with top management.
Threats:
High Risk of Failure: Starting a new business involves risk—a lot of risk—but the odds improve significantly
if one makes it past the first five years.
Lack of Knowledge and Experience: People typically launch businesses because they either have expertise in a
particular area or because they have a breakthrough idea. In-depth knowledge in a specific area doesn't
necessarily mean expertise in running a business. Successful business owners must know everything from
finance to human resources to marketing.