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

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Essentials ofEntrepreneurshipand Small BusinessManagementNinth EditionNorman M. ScarboroughJeffrey R. CornwallTest Bank forEssentials of Entrepreneurshipand Small Business ManagementRam Subramanian

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1Essentials of Entrepreneurship and Small Business Management, 9e(Scarborough)Chapter 1The Foundations of Entrepreneurship1) One of the most significant economic developments in recent business history relates to the________.A) growth of blue-chip corporationsB) development of Pacific Rim countriesC) entrepreneurial spiritD) additional employment opportunities offered by government institutionsAnswer: CDiff: 1Learning Obj: 1-1 Define the role of the entrepreneur in business in the United States andaround the world.AACSB: Reflective Thinking2) The Kauffman Foundation reports that nearly one out of ________ entrepreneurs in the UnitedStates start businesses of their own because they cannot find jobs elsewhere.A) fourB) fiveC) sixD) sevenAnswer: BDiff: 2Learning Obj: 1-1 Define the role of the entrepreneur in business in the United States andaround the world.AACSB: Reflective Thinking3) Globally, one in eight adults is actively engaged in launching a business.Answer: TRUEDiff: 1Learning Obj: 1-1 Define the role of the entrepreneur in business in the United States andaround the world.AACSB: Analytical Thinking4) Current competitive conditions favor large companies over smaller ones because of theirflexibility combined with their ability to use their size to achieve efficiency and economies ofscale.Answer: FALSEDiff: 1Learning Obj: 1-1 Define the role of the entrepreneur in business in the United States andaround the world.AACSB: Analytical Thinking

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25) Increased entrepreneurial activity is a phenomenon unique to the U.S.Answer: FALSEDiff: 1Learning Obj: 1-1 Define the role of the entrepreneur in business in the United States andaround the world.AACSB: Analytical Thinking6) One study conducted by the Global Entrepreneurship Monitor (GEM) reports that nearly onein eight people in the United States is working to start a business.Answer: TRUEDiff: 2Learning Obj: 1-1 Define the role of the entrepreneur in business in the United States andaround the world.AACSB: Analytical Thinking7) The profile of an entrepreneur includes ________.A) a desire for responsibility and moderate riskB) confidence in the ability to succeed and determinationC) a high level of energy, a desire for immediate feedback and a future orientationD) All the aboveAnswer: DDiff: 1Learning Obj: 1-2 Describe the entrepreneurial profile.AACSB: Reflective Thinking8) An entrepreneur is one who ________.A) is willing to attempt to implement a business concept and then give up if it does not meetimmediate expectationsB) understands the process of developing an idea and does not need to understand what it meansto bring that idea to a viable business conceptC) knows that the concept they are about to develop will result in a profitable businessD) creates a new business concept for the purpose of achieving profit and growth by assemblingthe necessary resources to capitalize on identified opportunitiesAnswer: DDiff: 1Learning Obj: 1-2 Describe the entrepreneurial profile.AACSB: Analytical Thinking9) All of the following are characteristics of the typical entrepreneurexcept________.A) confidence in his/her ability to succeedB) value of money over achievementC) desire for immediate feedbackD) a future orientationAnswer: BDiff: 1Learning Obj: 1-2 Describe the entrepreneurial profile.AACSB: Reflective Thinking

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310) Entrepreneurs are characterized by ________.A) skill at organizingB) desire for immediate feedbackC) high energy levelsD) All of the aboveAnswer: DDiff: 1Learning Obj: 1-2 Describe the entrepreneurial profile.AACSB: Reflective Thinking11) Entrepreneurs who repeatedly start businesses and grow to a sustainable size before strikingout again are known as ________ entrepreneurs.A) opportunisticB) persistentC) serialD) classicAnswer: CDiff: 1Learning Obj: 1-2 Describe the entrepreneurial profile.AACSB: Reflective Thinking12) Entrepreneurs typically possess ________.A) the ability to easily access capitalB) a set of unique skills that is usually accompanied by advanced degrees in several areasC) a high level of commitment, have a tolerance for ambiguity, are flexible and tenaciousD) specialized technical abilitiesAnswer: CDiff: 2Learning Obj: 1-2 Describe the entrepreneurial profile.AACSB: Reflective Thinking13) Entrepreneurs who start businesses because they cannot find work any other way are________.A) necessity entrepreneursB) serial entrepreneursC) opportunity entrepreneursD) corporate cast-offsAnswer: ADiff: 1Learning Obj: 1-2 Describe the entrepreneurial profile.AACSB: Reflective Thinking

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414) Research has isolated a set of characteristics that can predict who will succeed as anentrepreneur.Answer: FALSEDiff: 2Learning Obj: 1-2 Describe the entrepreneurial profile.AACSB: Diverse and Multicultural Work Environments15) Serial entrepreneurs repeatedly start businesses and grow them to a sustainable size beforestriking out again.Answer: TRUEDiff: 1Learning Obj: 1-2 Describe the entrepreneurial profile.AACSB: Analytical Thinking16) 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: TRUEDiff: 2Learning Obj: 1-2 Describe the entrepreneurial profile.AACSB: Reflective Thinking17) The opportunity to reap impressive profits is the primary motivation for most entrepreneurs.Answer: FALSEDiff: 2Learning Obj: 1-2 Describe the entrepreneurial profile.AACSB: Reflective Thinking

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518) What is an entrepreneur? Give a brief profile of a typical entrepreneur. What is the primarymotivation for the typical entrepreneur?Answer: An entrepreneur is someone who creates a new business in the face of risk anduncertainty for the purpose of achieving profit and growth by identifying opportunities andassembling the necessary resources to capitalize on them.While entrepreneurs tend to exhibit no isolated set of required traits, an entrepreneurial profilecontains 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 organizingEntrepreneurs are motivated most by a desire to control their own destiny, reach their ownpotential, make a difference, reap unlimited profits, and enjoy what they are doing.Diff: 3Learning Obj: 1-2 Describe the entrepreneurial profile.AACSB: Reflective Thinking

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6Mini Case 1-1: Hudson's DilemmaBill Hudson was a real craftsman when it came to being a machinist. Bill had learned almost allthat he knew from Hugo Huffman, his first and only employer. Bill Hudson was married and hadthree young children. He was 33 years old and had worked for Hugo ever since he finished histour in the Army. In 12 years, Bill had polished his skills under the watchful and critical eye ofHugo Huffman. Hugo was quick to recognize Bill's talent for the trade. Bill had a positiveattitude 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 thereputation for quality that had been established over its 42 years in operation. Hugo had come tothis country with his new wife, Hilda, when he was in his late twenties. Now the business was asuccess, but Hugo remembered the early years when he and Hilda had to struggle. Hugo wantedthe business to continue to produce the highest quality craftsman products possible. On a Fridayevening, 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 oldhands need a rest. In short, Hilda and I would like you to buy the business. We both feel thatyour 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 ideaHugo would retire. Bill and his wife, Anna, had only $4,200 in the bank. Most of Bill's salarywent for the normal costs of rearing three children. Hugo knew Bill did not have the money tobuy the business in cash, but he was willing to take a portion of the profits for the next 15 yearsand a modest initial investment from Bill.Bill had, for the past four years, made most of the technical decisions in the shop. Bill knew thecustomers and was well respected by the employees. He had never been involved in the businessside of the operation. He was a high school graduate but had never taken business courses. Billwas told by Hugo that even after deducting the percentage of the profits he would owe under thesales agreement, he would be able to almost double his annual earnings. Bill would have to takeon 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 ofthe typical entrepreneur. Factors in Bill's favor include knowledge of the technical aspects of thebusiness, a willingness to learn, a devotion to the business and its customers, and a favorablesales arrangement.Factors working against Bill include his lack of business training and experience, a lack ofpersonal assets, and possibly, insufficient management skills.Diff: 3Learning Obj: 1-2 Describe the entrepreneurial profile.AACSB: Reflective Thinking

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720) 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 uncertaintyB) make a difference in an area important to them and be recognized for those effortsC) create wealth without providing true valueD) exploit the opportunities that the free enterprise system offersAnswer: BDiff: 2Learning Obj: 1-3A Describe the benefits of entrepreneurship.AACSB: Reflective Thinking21) ________ entrepreneurs are business builders who seek innovative solutions to some ofsociety's most vexing problems.A) SocialB) OpportunisticC) SerialD) NecessityAnswer: ADiff: 2Learning Obj: 1-3A Describe the benefits of entrepreneurship.AACSB: Reflective Thinking22) 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 aboveAnswer: DDiff: 1Learning Obj: 1-3A Describe the benefits of entrepreneurship.AACSB: Reflective Thinking23) Social entrepreneurs use their skills to create profitable businesses and also to achieveeconomic, social and environmental goals for the common good.Answer: TRUEDiff: 1Learning Obj: 1-3A Describe the benefits of entrepreneurship.AACSB: Ethical Understanding and Reasoning24) Technology offers a significant advantage for entrepreneurs.Answer: TRUEDiff: 2Learning Obj: 1-3A Describe the benefits of entrepreneurship.AACSB: Information Technology

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825) Entrepreneurs choose to enter their particular business fields because they have an interest inthem and enjoy those lines of work. They have often made their hobbies their business.Answer: TRUEDiff: 2Learning Obj: 1-3A Describe the benefits of entrepreneurship.AACSB: Reflective Thinking26) Entrepreneurs are not willing to give up a steady paycheck.Answer: FALSEDiff: 2Learning Obj: 1-3A Describe the benefits of entrepreneurship.AACSB: Reflective Thinking27) There is concern over the future of entrepreneurship because so few high school and collegestudents want to start their own companies.Answer: FALSEDiff: 1Learning Obj: 1-3A Describe the benefits of entrepreneurship.AACSB: Reflective Thinking28) Potential drawbacks of entrepreneurship may include ________.A) uncertainty of income, risk, long hours, and high stressB) uncertainty of income, risk, easy hours, and frequent vacationsC) uncertainty of income, risk, long hours, and the immediate accumulation of wealthD) certainty of income, risk, long hours, and high stressAnswer: ADiff: 2Learning Obj: 1-3B Describe the drawbacks of entrepreneurship.AACSB: Reflective Thinking29) According to the Bureau of Labor Statistics, ________ percent of new businesses fail withintwo years, while ________ percent fail within five years.A) 34; 52B) 51; 64C) 35; 41D) 51; 31Answer: ADiff: 3Learning Obj: 1-3B Describe the drawbacks of entrepreneurship.AACSB: Analytical Thinking

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930) Within five years, ________ percent of new businesses will fail.A) 21B) 45C) 52D) 65Answer: CDiff: 2Learning Obj: 1-3B Describe the drawbacks of entrepreneurship.AACSB: Analytical Thinking31) The majority of new business owners work ________.A) fewer than 40 hours per weekB) more than 40 hours per weekC) more than 70 hours per weekD) more than 80 hours per weekAnswer: BDiff: 2Learning Obj: 1-3B Describe the drawbacks of entrepreneurship.AACSB: Analytical Thinking32) The majority of new business owners work fewer than 40 hours per week.Answer: FALSEDiff: 2Learning Obj: 1-3B Describe the drawbacks of entrepreneurship.AACSB: Reflective Thinking33) The majority of new business owners devote more than 40 hours per week to theircompanies.Answer: TRUEDiff: 2Learning Obj: 1-3B Describe the drawbacks of entrepreneurship.AACSB: Reflective Thinking34) One advantage of being your own boss and owning a small business is that work hours arevery flexible and leisure time is abundant.Answer: FALSEDiff: 1Learning Obj: 1-3B Describe the drawbacks of entrepreneurship.AACSB: Reflective Thinking

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1035) Globally, the rate of entrepreneurial activity is highest among people between the ages of 20and 44 and the number of Americans in that age range currently is more than ________ million.A) 10B) 120C) 84D) 40Answer: CDiff: 3Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship.AACSB: Analytical Thinking36) Factors that feed the economic boom behind entrepreneurship include ________.A) demographic and economic factorsB) technology and cloud computingC) the shift to a service-based economy and international opportunitiesD) All of the aboveAnswer: DDiff: 1Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship.AACSB: Analytical Thinking37) Which of the following isnotone of the forces driving the entrepreneurial trend in ourcountry?A) Shift away from a service economy.B) Independent lifestyle.C) International opportunities.D) E-commerce and the World Wide Web.Answer: ADiff: 2Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship.AACSB: Reflective Thinking38) Which of the following technological forces is driving the entrepreneurial trend in ournation?A) Cloud computing.B) Mobile marketing.C) The Internet.D) All of the aboveAnswer: DDiff: 1Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship.AACSB: Information Technology

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1139) Entrepreneurs may find benefit from the Internet due to its potential ________.A) if the organization is willing to invest millions of dollars in this effortB) only if the entrepreneur has a high level of technical abilitiesC) as a relatively low-cost solution to expand its revenue-generating abilitiesD) to take all pressure off other attributes of the business ventureAnswer: CDiff: 2Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship.AACSB: Information Technology40) International opportunities are ________.A) clearly out of reach for entrepreneurial businessesB) now within the reach of entrepreneurial businesses and may present significant opportunitiesC) highly limited for entrepreneursD) risky and do not merit serious consideration by the entrepreneurAnswer: BDiff: 2Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship.AACSB: Analytical Thinking41) Which of the following statements concerning small businesses and international markets isfalse?A) Although terrorism and global recession have slowed the growth of international tradesomewhat, 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 populationlives outside its borders.C) Because exporting is so complex and requires a company to have so many internationalexperts on staff, exporting is not feasible for small businesses.D) Small companies comprise 97 percent of all businesses engaged in exporting, yet theyaccount for only 30 percent of the nation's export sales.Answer: CDiff: 3Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship.AACSB: Analytical Thinking42) Small companies that operate globally from their inception are referred to as ________.A) micromultinationalsB) intrapreneurial venturesC) global companiesD) international companiesAnswer: ADiff: 1Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship.AACSB: Reflective Thinking

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1243) Small companies that have expanded successfully into foreign markets tend to rely on all butwhich 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 internationalpresence.D) Forge alliances with local partners.Answer: BDiff: 3Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship.AACSB: Analytical Thinking44) The shift to a service economy has not had a significant impact on entrepreneurialopportunities.Answer: FALSEDiff: 1Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship.AACSB: Reflective Thinking45) Cloud computing allows businesses to use a variety of applications and has reduced costsand added flexibility.Answer: TRUEDiff: 1Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship.AACSB: Information Technology46) 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 theyare doing. Potential drawbacks include the uncertainty of income, risk of losing their entireinvestment, long hours and hard work, a somewhat lower quality of life until the business getsstarted, high levels of stress, and absolute responsibility.Diff: 3Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship.AACSB: Reflective Thinking

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1347) 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.∙ Demographic and economic factors, such as younger people starting businesses and greateropportunities for wealth.∙ Shift to a service economy, which opens up opportunities for small business owners.∙ Technological advancements, mobile computing, the Internet and cloud computing that make iteasier 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 todo.∙ International opportunities areopening more doors than ever before for entrepreneurs.Diff: 3Learning Obj: 1-4 Explain the forces that are driving the growth of entrepreneurship.AACSB: Reflective Thinking48) Entrepreneurial couples who work together as co-owners of their business are referred to as________.A) dual entrepreneursB) corporate dropoutsC) corporate cast-offsD) copreneursAnswer: DDiff: 2Learning Obj: 1-5 Explain the cultural diversity of entrepreneurship.AACSB: Reflective Thinking49) Women in business still experience ________ as they attempt to break the "glass ceiling."A) successB) opportunitiesC) discriminationD) ease of navigationAnswer: CDiff: 2Learning Obj: 1-5 Explain the cultural diversity of entrepreneurship.AACSB: Diverse and Multicultural Work Environments50) The demographic attributes of successful entrepreneurs are ________.A) limited to specific ages, genders, and ethnic backgroundsB) uncertain and have not been fully studied or analyzedC) are key predictors that determine how long the business will surviveD) highly diverse relating to age, gender, and ethnicityAnswer: DDiff: 2Learning Obj: 1-5 Explain the cultural diversity of entrepreneurship.AACSB: Diverse and Multicultural Work Environments

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1451) Which of the following statements isnottrue regarding the diversity of entrepreneurs?A) Minority-owned businesses have come a long way in the past decade, and their success rate isclimbing.B) Minority-owned businesses now account for approximately 22 percent of all businesses in theU.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: BDiff: 2Learning Obj: 1-5 Explain the cultural diversity of entrepreneurship.AACSB: Diverse and Multicultural Work Environments52) Which of the following statements about women-owned businesses isfalse?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 thatmen start.Answer: CDiff: 3Learning Obj: 1-5 Explain the cultural diversity of entrepreneurship.AACSB: Diverse and Multicultural Work Environments53) ________ percent of all U.S. businesses are family-owned and managed.A) Twenty-fiveB) FiftyC) SeventyD) NinetyAnswer: DDiff: 2Learning Obj: 1-5 Explain the cultural diversity of entrepreneurship.AACSB: Analytical Thinking54) "Copreneurs" are defined as ________.A) entrepreneurs that work part-timeB) highly successful entrepreneurs with prior company experience and backgroundC) those entrepreneurs that will eventually combine their business with another ventureD) entrepreneurial couples that work together as co-owners of their businessAnswer: DDiff: 2Learning Obj: 1-5 Explain the cultural diversity of entrepreneurship.AACSB: Diverse and Multicultural Work Environments

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