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Test Bank for Essentials of Entrepreneurship and Small Business Management, 9th Edition

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    Essentials of Entrepreneurship and Small Business Management Ninth Edition Norman M. Scarborough Jeffrey R. Cornwall Test Bank for Essentials of Entrepreneurship and Small Business Management Ram Subramanian

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    1 Essentials of Entrepreneurship and Small Business Management, 9e (Scarborough) Chapter 1 The Foundations of Entrepreneurship 1) One of the most significant economic developments in recent business history relates to the ________. A) growth of blue-chip corporations B) development of Pacific Rim countries C) entrepreneurial spirit D) additional employment opportunities offered by government institutions Answer: C Diff: 1 Learning Obj: 1-1 Define the role of the entrepreneur in business in the United States and around the world. AACSB: Reflective Thinking 2) The Kauffman Foundation reports that nearly one out of ________ entrepreneurs in the United States start businesses of their own because they cannot find jobs elsewhere. A) four B) five C) six D) seven Answer: B Diff: 2 Learning Obj: 1-1 Define the role of the entrepreneur in business in the United States and around the world. AACSB: Reflective Thinking 3) Globally, one in eight adults is actively engaged in launching a business. Answer: TRUE Diff: 1 Learning Obj: 1-1 Define the role of the entrepreneur in business in the United States and around the world. AACSB: Analytical Thinking 4) Current competitive conditions favor large companies over smaller ones because of their flexibility combined with their ability to use their size to achieve efficiency and economies of scale. Answer: FALSE Diff: 1 Learning Obj: 1-1 Define the role of the entrepreneur in business in the United States and around the world. AACSB: Analytical Thinking

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    2 5) Increased entrepreneurial activity is a phenomenon unique to the U.S. Answer: FALSE Diff: 1 Learning Obj: 1-1 Define the role of the entrepreneur in business in the United States and around the world. AACSB: Analytical Thinking 6) One study conducted by the Global Entrepreneurship Monitor (GEM) reports that nearly one in eight people in the United States is working to start a business. Answer: TRUE Diff: 2 Learning Obj: 1-1 Define the role of the entrepreneur in business in the United States and around the world. AACSB: Analytical Thinking 7) The profile of an entrepreneur includes ________. A) a desire for responsibility and moderate risk B) confidence in the ability to succeed and determination C) a high level of energy, a desire for immediate feedback and a future orientation D) All the above Answer: D Diff: 1 Learning Obj: 1-2 Describe the entrepreneurial profile. AACSB: Reflective Thinking 8) An entrepreneur is one who ________. A) is willing to attempt to implement a business concept and then give up if it does not meet immediate expectations B) understands the process of developing an idea and does not need to understand what it means to bring that idea to a viable business concept C) knows that the concept they are about to develop will result in a profitable business D) creates a new business concept for the purpose of achieving profit and growth by assembling the necessary resources to capitalize on identified opportunities Answer: D Diff: 1 Learning Obj: 1-2 Describe the entrepreneurial profile. AACSB: Analytical Thinking 9) All of the following are characteristics of the typical entrepreneur except ________. A) confidence in his/her ability to succeed B) value of money over achievement C) desire for immediate feedback D) a future orientation Answer: B Diff: 1 Learning Obj: 1-2 Describe the entrepreneurial profile. AACSB: Reflective Thinking

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    3 10) Entrepreneurs are characterized by ________. A) skill at organizing B) desire for immediate feedback C) high energy levels D) All of the above Answer: D Diff: 1 Learning Obj: 1-2 Describe the entrepreneurial profile. AACSB: Reflective Thinking 11) Entrepreneurs who repeatedly start businesses and grow to a sustainable size before striking out again are known as ________ entrepreneurs. A) opportunistic B) persistent C) serial D) classic Answer: C Diff: 1 Learning Obj: 1-2 Describe the entrepreneurial profile. AACSB: Reflective Thinking 12) Entrepreneurs typically possess ________. A) the ability to easily access capital B) a set of unique skills that is usually accompanied by advanced degrees in several areas C) a high level of commitment, have a tolerance for ambiguity, are flexible and tenacious D) specialized technical abilities Answer: C Diff: 2 Learning Obj: 1-2 Describe the entrepreneurial profile. AACSB: Reflective Thinking 13) Entrepreneurs who start businesses because they cannot find work any other way are ________. A) necessity entrepreneurs B) serial entrepreneurs C) opportunity entrepreneurs D) corporate cast-offs Answer: A Diff: 1 Learning Obj: 1-2 Describe the entrepreneurial profile. AACSB: Reflective Thinking

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    4 14) Research has isolated a set of characteristics that can predict who will succeed as an entrepreneur. Answer: FALSE Diff: 2 Learning Obj: 1-2 Describe the entrepreneurial profile. AACSB: Diverse and Multicultural Work Environments 15) Serial entrepreneurs repeatedly start businesses and grow them to a sustainable size before striking out again. Answer: TRUE Diff: 1 Learning Obj: 1-2 Describe the entrepreneurial profile. AACSB: Analytical Thinking 16) Surveys show that small business owners believe that, as entrepreneurs, they work harder, earn more money, and are happier than if they worked for a large company. Answer: TRUE Diff: 2 Learning Obj: 1-2 Describe the entrepreneurial profile. AACSB: Reflective Thinking 17) The opportunity to reap impressive profits is the primary motivation for most entrepreneurs. Answer: FALSE Diff: 2 Learning Obj: 1-2 Describe the entrepreneurial profile. AACSB: Reflective Thinking

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    5 18) What is an entrepreneur? Give a brief profile of a typical entrepreneur. What is the primary motivation for the typical entrepreneur? Answer: An entrepreneur is someone who creates a new business in the face of risk and uncertainty for the purpose of achieving profit and growth by identifying opportunities and assembling the necessary resources to capitalize on them. While entrepreneurs tend to exhibit no isolated set of required traits, an entrepreneurial profile contains the following characteristics: ∙ Desire for responsibility ∙ Preference for moderate risk ∙ Confidence in their ability to succeed ∙ Desire for immediate feedback ∙ High level of energy ∙ Future orientation ∙ Skill at organizing Entrepreneurs are motivated most by a desire to control their own destiny, reach their own potential, make a difference, reap unlimited profits, and enjoy what they are doing. Diff: 3 Learning Obj: 1-2 Describe the entrepreneurial profile. AACSB: Reflective Thinking

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    6 Mini Case 1-1: Hudson's Dilemma Bill Hudson was a real craftsman when it came to being a machinist. Bill had learned almost all that he knew from Hugo Huffman, his first and only employer. Bill Hudson was married and had three young children. He was 33 years old and had worked for Hugo ever since he finished his tour in the Army. In 12 years, Bill had polished his skills under the watchful and critical eye of Hugo Huffman. Hugo was quick to recognize Bill's talent for the trade. Bill had a positive attitude about learning and displayed a drive for perfection that Hugo admired. Hugo's Machine Shop was a successful small business. Its success was based mostly on the reputation for quality that had been established over its 42 years in operation. Hugo had come to this country with his new wife, Hilda, when he was in his late twenties. Now the business was a success, but Hugo remembered the early years when he and Hilda had to struggle. Hugo wanted the business to continue to produce the highest quality craftsman products possible. On a Friday evening, he called Bill into his office at closing time, poured him a cup of half-day-old coffee, and began to talk with him about the future. "Bill, Hilda and I are getting old and I want to retire. It has been 42 years of fun but these old hands need a rest. In short, Hilda and I would like you to buy the business. We both feel that your heart is in this craft and that you would always retain the quality that we have stood for." Bill was taken back by the offer. He, of course, knew Hugo was getting older, but had no idea Hugo would retire. Bill and his wife, Anna, had only $4,200 in the bank. Most of Bill's salary went for the normal costs of rearing three children. Hugo knew Bill did not have the money to buy the business in cash, but he was willing to take a portion of the profits for the next 15 years and a modest initial investment from Bill. Bill had, for the past four years, made most of the technical decisions in the shop. Bill knew the customers and was well respected by the employees. He had never been involved in the business side of the operation. He was a high school graduate but had never taken business courses. Bill was told by Hugo that even after deducting the percentage of the profits he would owe under the sales agreement, he would be able to almost double his annual earnings. Bill would have to take on all the business functions himself because Anna had no business training either. 19) Which entrepreneurial characteristics does Bill have that may be important to his success? Which characteristic could lead to his failure? Answer: This case requires the student to compare Bill's personality characteristics with those of the typical entrepreneur. Factors in Bill's favor include knowledge of the technical aspects of the business, a willingness to learn, a devotion to the business and its customers, and a favorable sales arrangement. Factors working against Bill include his lack of business training and experience, a lack of personal assets, and possibly, insufficient management skills. Diff: 3 Learning Obj: 1-2 Describe the entrepreneurial profile. AACSB: Reflective Thinking

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    7 20) In addition to the opportunity to create their own destiny and enjoy what they do, entrepreneurs also benefit from the ability to ________. A) earn tremendous wealth without risk and uncertainty B) make a difference in an area important to them and be recognized for those efforts C) create wealth without providing true value D) exploit the opportunities that the free enterprise system offers Answer: B Diff: 2 Learning Obj: 1-3A Describe the benefits of entrepreneurship. AACSB: Reflective Thinking 21) ________ entrepreneurs are business builders who seek innovative solutions to some of society's most vexing problems. A) Social B) Opportunistic C) Serial D) Necessity Answer: A Diff: 2 Learning Obj: 1-3A Describe the benefits of entrepreneurship. AACSB: Reflective Thinking 22) Which of the following is a benefit of entrepreneurship? A) The opportunity to gain control over your own destiny. B) The opportunity to reach your full potential. C) The opportunity to do what you enjoy. D) All of the above Answer: D Diff: 1 Learning Obj: 1-3A Describe the benefits of entrepreneurship. AACSB: Reflective Thinking 23) Social entrepreneurs use their skills to create profitable businesses and also to achieve economic, social and environmental goals for the common good. Answer: TRUE Diff: 1 Learning Obj: 1-3A Describe the benefits of entrepreneurship. AACSB: Ethical Understanding and Reasoning 24) Technology offers a significant advantage for entrepreneurs. Answer: TRUE Diff: 2 Learning Obj: 1-3A Describe the benefits of entrepreneurship. AACSB: Information Technology

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    8 25) Entrepreneurs choose to enter their particular business fields because they have an interest in them and enjoy those lines of work. They have often made their hobbies their business. Answer: TRUE Diff: 2 Learning Obj: 1-3A Describe the benefits of entrepreneurship. AACSB: Reflective Thinking 26) Entrepreneurs are not willing to give up a steady paycheck. Answer: FALSE Diff: 2 Learning Obj: 1-3A Describe the benefits of entrepreneurship. AACSB: Reflective Thinking 27) There is concern over the future of entrepreneurship because so few high school and college students want to start their own companies. Answer: FALSE Diff: 1 Learning Obj: 1-3A Describe the benefits of entrepreneurship. AACSB: Reflective Thinking 28) Potential drawbacks of entrepreneurship may include ________. A) uncertainty of income, risk, long hours, and high stress B) uncertainty of income, risk, easy hours, and frequent vacations C) uncertainty of income, risk, long hours, and the immediate accumulation of wealth D) certainty of income, risk, long hours, and high stress Answer: A Diff: 2 Learning Obj: 1-3B Describe the drawbacks of entrepreneurship. AACSB: Reflective Thinking 29) According to the Bureau of Labor Statistics, ________ percent of new businesses fail within two years, while ________ percent fail within five years. A) 34; 52 B) 51; 64 C) 35; 41 D) 51; 31 Answer: A Diff: 3 Learning Obj: 1-3B Describe the drawbacks of entrepreneurship. AACSB: Analytical Thinking

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    9 30) Within five years, ________ percent of new businesses will fail. A) 21 B) 45 C) 52 D) 65 Answer: C Diff: 2 Learning Obj: 1-3B Describe the drawbacks of entrepreneurship. AACSB: Analytical Thinking 31) The majority of new business owners work ________. A) fewer than 40 hours per week B) more than 40 hours per week C) more than 70 hours per week D) more than 80 hours per week Answer: B Diff: 2 Learning Obj: 1-3B Describe the drawbacks of entrepreneurship. AACSB: Analytical Thinking 32) The majority of new business owners work fewer than 40 hours per week. Answer: FALSE Diff: 2 Learning Obj: 1-3B Describe the drawbacks of entrepreneurship. AACSB: Reflective Thinking 33) The majority of new business owners devote more than 40 hours per week to their companies. Answer: TRUE Diff: 2 Learning Obj: 1-3B Describe the drawbacks of entrepreneurship. AACSB: Reflective Thinking 34) One advantage of being your own boss and owning a small business is that work hours are very flexible and leisure time is abundant. Answer: FALSE Diff: 1 Learning Obj: 1-3B Describe the drawbacks of entrepreneurship. AACSB: Reflective Thinking

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    10 35) Globally, the rate of entrepreneurial activity is highest among people between the ages of 20 and 44 and the number of Americans in that age range currently is more than ________ million. A) 10 B) 120 C) 84 D) 40 Answer: C Diff: 3 Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship. AACSB: Analytical Thinking 36) Factors that feed the economic boom behind entrepreneurship include ________. A) demographic and economic factors B) technology and cloud computing C) the shift to a service-based economy and international opportunities D) All of the above Answer: D Diff: 1 Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship. AACSB: Analytical Thinking 37) Which of the following is not one of the forces driving the entrepreneurial trend in our country? A) Shift away from a service economy. B) Independent lifestyle. C) International opportunities. D) E-commerce and the World Wide Web. Answer: A Diff: 2 Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship. AACSB: Reflective Thinking 38) Which of the following technological forces is driving the entrepreneurial trend in our nation? A) Cloud computing. B) Mobile marketing. C) The Internet. D) All of the above Answer: D Diff: 1 Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship. AACSB: Information Technology

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    11 39) Entrepreneurs may find benefit from the Internet due to its potential ________. A) if the organization is willing to invest millions of dollars in this effort B) only if the entrepreneur has a high level of technical abilities C) as a relatively low-cost solution to expand its revenue-generating abilities D) to take all pressure off other attributes of the business venture Answer: C Diff: 2 Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship. AACSB: Information Technology 40) International opportunities are ________. A) clearly out of reach for entrepreneurial businesses B) now within the reach of entrepreneurial businesses and may present significant opportunities C) highly limited for entrepreneurs D) risky and do not merit serious consideration by the entrepreneur Answer: B Diff: 2 Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship. AACSB: Analytical Thinking 41) Which of the following statements concerning small businesses and international markets is false ? A) Although terrorism and global recession have slowed the growth of international trade somewhat, global opportunities for small businesses have a long-term positive outlook. B) Although the U.S. is an attractive market, approximately 95 percent of the world's population lives outside its borders. C) Because exporting is so complex and requires a company to have so many international experts on staff, exporting is not feasible for small businesses. D) Small companies comprise 97 percent of all businesses engaged in exporting, yet they account for only 30 percent of the nation's export sales. Answer: C Diff: 3 Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship. AACSB: Analytical Thinking 42) Small companies that operate globally from their inception are referred to as ________. A) micromultinationals B) intrapreneurial ventures C) global companies D) international companies Answer: A Diff: 1 Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship. AACSB: Reflective Thinking

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    12 43) Small companies that have expanded successfully into foreign markets tend to rely on all but which of the following strategies? A) Research foreign markets thoroughly. B) Focus on many countries initially. C) Utilize government resources designed to help small companies establish an international presence. D) Forge alliances with local partners. Answer: B Diff: 3 Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship. AACSB: Analytical Thinking 44) The shift to a service economy has not had a significant impact on entrepreneurial opportunities. Answer: FALSE Diff: 1 Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship. AACSB: Reflective Thinking 45) Cloud computing allows businesses to use a variety of applications and has reduced costs and added flexibility. Answer: TRUE Diff: 1 Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship. AACSB: Information Technology 46) Discuss the potential benefits and drawbacks of entrepreneurship. Answer: Entrepreneurs benefit by controlling their own destiny, reaching their own potential, making a difference, reaping impressive profits, contributing to society, and enjoying what they are doing. Potential drawbacks include the uncertainty of income, risk of losing their entire investment, long hours and hard work, a somewhat lower quality of life until the business gets started, high levels of stress, and absolute responsibility. Diff: 3 Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship. AACSB: Reflective Thinking

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    13 47) Describe the factors that are driving the current entrepreneurial trend in the U.S. economy. Answer: ∙ A more positive attitude toward entrepreneurs. ∙ Higher levels and greater availability of entrepreneurial education. ∙ Demogra phic and economic factors, such as younger people starting businesses and greater opportunities for wealth. ∙ Shift to a service economy, which opens up opportunities for small business owners. ∙ Technological advancements, mobile computing, the Internet a nd cloud computing that make it easier for small businesses to compete on a more level playing field with larger companies. ∙ Independent lifestyle, allowing people more freedom to make choices about what they want to do. ∙ International opportunities are opening more doors than ever before for entrepreneurs. Diff: 3 Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship. AACSB: Reflective Thinking 48) Entrepreneurial couples who work together as co-owners of their business are referred to as ________. A) dual entrepreneurs B) corporate dropouts C) corporate cast-offs D) copreneurs Answer: D Diff: 2 Learning Obj: 1-5 Explain the cultural diversity of entrepreneurship. AACSB: Reflective Thinking 49) Women in business still experience ________ as they attempt to break the "glass ceiling." A) success B) opportunities C) discrimination D) ease of navigation Answer: C Diff: 2 Learning Obj: 1-5 Explain the cultural diversity of entrepreneurship. AACSB: Diverse and Multicultural Work Environments 50) The demographic attributes of successful entrepreneurs are ________. A) limited to specific ages, genders, and ethnic backgrounds B) uncertain and have not been fully studied or analyzed C) are key predictors that determine how long the business will survive D) highly diverse relating to age, gender, and ethnicity Answer: D Diff: 2 Learning Obj: 1-5 Explain the cultural diversity of entrepreneurship. AACSB: Diverse and Multicultural Work Environments

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    14 51) Which of the following statements is not true regarding the diversity of entrepreneurs? A) Minority-owned businesses have come a long way in the past decade, and their success rate is climbing. B) Minority-owned businesses now account for approximately 22 percent of all businesses in the U.S. C) Immigrants with more education and experience than those of the past are coming to the U.S. and succeeding in entrepreneurial ventures. D) The numbers of part-time and home-based entrepreneurs are rising. Answer: B Diff: 2 Learning Obj: 1-5 Explain the cultural diversity of entrepreneurship. AACSB: Diverse and Multicultural Work Environments 52) Which of the following statements about women-owned businesses is false ? A) The businesses women start tend to be smaller than those men start. B) Women own about 28 percent of all privately-held businesses in the U.S. C) The number of women-owned businesses is growing slower than the national average. D) Women-owned companies are far less likely to attract equity capital investments as those that men start. Answer: C Diff: 3 Learning Obj: 1-5 Explain the cultural diversity of entrepreneurship. AACSB: Diverse and Multicultural Work Environments 53) ________ percent of all U.S. businesses are family-owned and managed. A) Twenty-five B) Fifty C) Seventy D) Ninety Answer: D Diff: 2 Learning Obj: 1-5 Explain the cultural diversity of entrepreneurship. AACSB: Analytical Thinking 54) "Copreneurs" are defined as ________. A) entrepreneurs that work part-time B) highly successful entrepreneurs with prior company experience and background C) those entrepreneurs that will eventually combine their business with another venture D) entrepreneurial couples that work together as co-owners of their business Answer: D Diff: 2 Learning Obj: 1-5 Explain the cultural diversity of entrepreneurship. AACSB: Diverse and Multicultural Work Environments

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