Test Bank for Entrepreneurship v3 1
Edition by Portolese, Krause, Bonner
ISBN: 9798887944401
COPYRIGHT PAGE
Published by:
© 2026 by FlatWorld. All rights reserved. Your use of this work is subject to the License Agreement available here http://www.flatworldknowledge.com/legal. No part of this work may be used, modified, or reproduced in any form or by any means except as expressly permitted under the License Agreement.
Chapter 1
What Is Entrepreneurship?
TRUE/FALSE
1. All entrepreneurs are small business owners.
ANS: F DIF: Moderate
2. All risks in starting a new business can be known, understood, and quantified.
ANS: F DIF: Easy
3. Those with white-collar jobs tend to be involved in hard, physical labor.
ANS: F DIF: Easy
4. Knowledge-based jobs started to become prevalent in the mid- to late-twentieth century.
ANS: T DIF: Easy
5. The desire for creative freedom is one reason why people start their own businesses.
ANS: T DIF: Easy
6. Tax deductible expenses add to a business’ overall tax liability.
ANS: F DIF: Easy
7. It is common to start your own business and work less than thirty hours a week.
ANS: F DIF: Easy
8. There are numerous legal obligations that come with starting a business.
ANS: T DIF: Easy
9. Small businesses account for approximately half of the GDP of the United States.
ANS: T DIF: Moderate
10. Even though the majority of firms have zero employees, small businesses account for almost half of all jobs in the United States.
ANS: T DIF: Moderate
MULTIPLE CHOICE
11. Which of the following is not a type of small business?
a. home-based
b. wholesaler
c. consulting/contracting
d. franchise
e. online retailer
ANS: B DIF: Moderate
12. What kind of activities tend to happen at a home-based business?
a. writing/copyediting services
b. event planning
c. interior decorating
d. computer repair
e! All of the above are true.
ANS: E DIF: Easy
13. Entrepreneurial ventures tend to look for _____ opportunities but may encounter unknown _____.
a. established; challenges
b. new; costs
c. stable; risks
d. small; failures
e. innovative; risks
ANS: E DIF: Moderate
14. A(n) ________ is a person or people who start a new business venture.
a. sole proprietor
b. franchisee
c. innovator
d. entrepreneur
e. storefront
ANS: D DIF: Moderate
15. _________ is the process of starting or building a business venture.
a. Business servicing
b. Franchising
c. Entrepreneurship
d. Contracting
e. Retailing
ANS: C DIF: Moderate
16. This is the simplest form of business ownership, in which there is a single owner.
a. franchise
b. sole proprietorship
c. agency
d. contractor
e. storefront
ANS: B DIF: Easy
17. ______ theorized that profit was the reward for risk-taking during periods of uncertainty.
a. Peter F. Drucker
b. Max Weber
c. Joseph Schumpeter
d. Frank H. Knight
e. Israel Kirtzner
ANS: D DIF: Hard
18. _______ believed that one’s religious views would inform a person’s beliefs about the accumulation of wealth and entrepreneurship.
a. Israel Kirtzner
b. Peter F. Drucker
c. Max Weber
d. Mark Casson
e. Frank H. Knight
ANS: C DIF: Hard
19. Businesses expenses that reduce the tax liability of a business are called?
a. tax deflating
b. tax inflating
c. automobile expenses
d. tax deductible
e. insurance
ANS: D DIF: Easy
20. _______ is a government agency that helps support small business owners.
a. Small Business Administration
b. Department of Labor
c. Better Business Bureau
d. Department of Commerce
e. Department of Business
ANS: A DIF: Moderate
21. _________ is/are a collection of laws, rules, and codes that businesses and owners must follow.
a. Financial obligations
b. Legal regulations
c. Autonomous notifications
d. Active policies
e. Interactive rule-making
ANS: B DIF: Easy
22. _________ is/are the general requirements of a business to pay money that is owed by the business.
a. Financial obligations
b. Active policies
c. Autonomous notifications
d. Legal regulations
e. Interactive rule-making
ANS: A DIF: Easy
23. __________ is the ability to determine one’s own course of action.
a. Dichotomy
b. Entrepreneurship
c. Autonomy
d. Management
e. Interactivity
ANS: C DIF: Easy
24. The ____________ introduced machinery, steam powered equipment, and railway transportation, which dramatically changed the way people worked and lived.
a. Knowledge Revolution
b. Industrial Revolution
c. Internet Revolution
d. Blue-Collar Revolution
e. Agricultural Revolution
ANS: B DIF: Moderate
25. ________ is the process by which new products, services, or ideas are conceived.
a. Innovation
b. Creation
c. Division
d. Entrepreneurship
e. Regulation
ANS: A DIF: Easy
26. ____ is a situation or condition in which a business may be exposed to a financial harm or loss.
a. Entrepreneurship
b. Consulting
c. Risk
d. Contracting
e. Leveraging
ANS: C DIF: Easy
27. As opposed to blue-collar jobs, ______ jobs involve specialized skills outside of physical labor.
a. venture
b. entrepreneurial
c. theory-based
d. knowledge-based
e. industry-based
ANS: D DIF: Moderate
28. Which of the following statements about small businesses is inaccurate?
a. Small businesses make up only approximately 10 percent of the nation’s GDP.
b. Approximately one tenth of small businesses are owned by women.
c. Approximately one-fifth of small businesses are family owned.
d. Approximately 50 percent of all small businesses are home-based businesses.
e. Approximately 60 percent of all firms have no employees.
ANS: A DIF: Moderate
29. Facebook has had an influence on the business world. It was started in what year?
a! 2000
b! 2002
c! 2004
d! 2006
e! 2008
ANS: C DIF: Moderate
30. The Industrial Revolution caused which of the following changes?
a. famines became more common
b. white-collar jobs began to proliferate
c. more food began to be produced by hand
d. a decrease in the literacy rate
e. the population transition from farm to city
ANS: E DIF: Easy
31. Google’s AdWords system uses what kind of concept?
a. advertising
b. front linkages
c. back linkages
d. view counting procedures
e. pay-per-click
ANS: E DIF: Moderate
32. Broadcast.com, started in 1995, had difficulty and closed in 2002 due to what problem?
a. too many competitors
b. no one wanted streaming radio or video
c. too few people had personal computers
d. lack of stable, high-speed internet connections
e. lack of quality content
ANS: D DIF: Moderate
33. Google and Facebook utilize a system of advertising that uses a person’s ______________ to provide targeted advertising.
a. phone number
b. zip code
c. interests and browsing habits
d. eating habits
e. family history
ANS: C DIF: Moderate
34. Small businesses account for approximately what fraction of the nation’s GDP?
a! 10%
b! 25%
c! 30%
d! 50%
e! 75%
ANS: D DIF: Moderate
35. Small businesses account for approximately what fraction of recently created jobs?
a! 10%
b! 25%
c! 50%
d! 63%
e! 80%
ANS: D DIF: Moderate
36. Which of the following is not a reason most people start up their own business?
a. ability to be the boss
b. ability to pursue their own passions
c. wants a rigid schedule
d. help people improve their lives
e. creative freedom
ANS: C DIF: Easy
37. Which of the following is generally not a tax-deductible expense?
a. automobile expenses
b. phone, internet, and other utility expenses
c. advertising
d. a vehicle for personal use
e. bad debts
ANS: D DIF: Easy
39. Which theorist believed that entrepreneurs are always looking for opportunities for change and to exploit those opportunities?
a. Max Weber
b. Peter F. Drucker
c. Frank H. Knight
d. Joseph Schumpeter
e. Israel Kirtzner
ANS: B DIF: Moderate
40. Which theorist believed that entrepreneurs take advantage of opportunities that others would miss, and are focused on discovering these opportunities?
a. Israel Kirtzner
b. Max Weber
c. Frank H. Knight
d. Joseph Schumpeter
e. Peter F. Drucker
ANS: A DIF: Moderate
41. Mark Cuban started the streaming service:
a. Pandora
b. AudioNet
c. Netflix
d. Redbox
e. Yahoo
ANS: B DIF: Easy
42. Why are franchise owners not considered entrepreneurs?
a. They take no financial risks.
b. They do not manage employees.
c. They are selling established products, not creating new ones.
d. Franchises do not require planning.
e. They do not own the business brand.
ANS: C DIF: Moderate
43. What major technological advancement in the 1980s significantly benefited small businesses?
a. the steam engine
b. the personal computer
c. transcontinental railroad
d. microwave ovens
e. satellite radio
ANS: B DIF: Easy
44. Online marketplaces such as Etsy and eBay allow small businesses to
a. eliminate financial risks.
b. reach global customers easily.
c. avoid paying taxes.
d. operate without technology.
e. reduce product manufacturing costs to zero.
ANS: B DIF: Easy
45. Which entrepreneurial theory focuses on innovation as the driver of economic growth?
a. McClelland’s Achievement Theory
b. Schumpeter’s Innovation Theory
c. X-Efficiency Theory
d. Weber’s Sociological Theory
e. Classical Management Theory
ANS: B DIF: Medium
46. Which technological development had the greatest long-term impact on enabling online retail and global small business reach?
a. streetcars
b. telegraph
c. internet and e-commerce platforms
d. steam engine
e. telephone
ANS: C DIF: Hard
COMPLETION
42. A(n) ___________________ is the person or people who start a new business venture.
ANS: entrepreneur DIF: Easy
43. Entrepreneurial ventures tend to seek new and ___________________ opportunities.
ANS: innovative DIF: Moderate
44. The __________________ occurred between the late eighteenth century to the middle of the nineteenth century.
ANS: Industrial Revolution
DIF: Moderate
45. The _____________ is a global network of connected and communicating computers and servers.
ANS: internet DIF: Easy
46. ________________is a broad measure of the total value of a nation’s produced goods and services.
ANS: GDP
DIF: Easy
47. ___________include paying wages, taxes, loan repayments, and payments to suppliers.
ANS: Financial obligations
DIF: Moderate
48. Small business owners may enjoy a great deal of ____________, but they must still attend to the needs and demands of suppliers, employees, and regulators, while maintaining other obligations.
ANS: autonomy
DIF: Hard
49. ___________________ expenses help to decrease a business’ overall tax liability and burden.
ANS: Tax deductible
DIF: Moderate
50. A ___________________ has a single business owner.
ANS: sole proprietorship
DIF: Easy
51. It is not uncommon for an entrepreneur to turn a(n) __________________ into a hobby, and then eventually into a business.
ANS: passion
DIF: Moderate
52. The ability, or _______________, to work your own hours is one reason for starting a business.
ANS: flexibility
DIF: Moderate
53. The theorist _________ suggests that profit is the reward for taking risks.
ANS: Frank H. Knight
DIF: Moderate
ESSAY
54. Compare and contrast two of the different types of small businesses.
ANS:
Student answers will vary.
Food Service and Home-Based. Food service businesses are a common type of homebased business, but not all home-based businesses are in the food service industry. Homebased businesses tend to be sole proprietorships or family-owned businesses, while food service ones do lend themselves to this structural model, they are also frequently a franchised business opportunity. Starting a home-based food service business can be difficult, usually due to the need for a separate space that is used for the preparation of the food, and the attendant health and safety regulations that come with it; other food service businesses that operate in a stand-alone building or as a store front tend to come built with such facilities. With the proliferation of food trucks and third-party delivery services, food can be prepared at home and presented to customers in a variety of ways that were not necessarily available twenty to thirty years ago.
DIF: Hard
55. Explain the differences between a small business and an entrepreneurial venture.
ANS:
Small businesses tend to deal with a specific, narrow set of inputs and outputs—they will frequently need the same supplies on a regular or semi-regular basis while producing a narrow range of products and/or services. There may be seasonal or other forms of variation in this, but small businesses tend to deal with known constraints and risks. Entrepreneurial ventures, on the other hand, tend to be expansionary and innovative,
dealing with a variable set of inputs and a growing or changing set of outputs. The ultimate goals of the two types tend to be different as well. Small businesses tend to operate for the long-haul (if possible) for the purposes of stability, expanding when necessary, possible, and desirable. The owners of an entrepreneurial venture, however, may wish to see their venture become viable and then be sold at a significant profit, sometimes with that money then used to start up the next entrepreneurial venture.
DIF: Moderate
56. Explain the importance of small businesses to the American economy.
ANS:
Small businesses make up approximately 50 percent of the Gross Domestic Product (GDP) of the United States in most years. They employ just under half of all people in the country, while accounting for just over half of all sales of goods and services. They have historically been a path for integrating immigrants into the country. They can propel both immigrants and native-born populations onto the path of financial independence and success. In some instances, a small business may grow and evolve into a large venture.
DIF: Moderate
57. Explain some of the benefits of owning your own business.
ANS:
For many small-business owners, flexibility and autonomy are the major, driving reasons for going into business for themselves. The flexibility to set your own work schedule allows for parents, students, and those working a different job the opportunity to strike out on their own while still being tethered to something familiar. Personal autonomy is another important factor—not having to report to a boss can provide an invigorating feeling every day. These two factors fit with other, positive aspects of business ownership that include: the ability to pursue your own goals and passions, the time to watch something grow and develop that you created, the opportunity to improve. and the chance to invest in yourself and your family.
DIF: Moderate
58. Describe the positive and negative aspects of owning a small business.
ANS:
Being able to set your own schedule is one positive aspect, but small business owners need to be flexible, because owning a small business will be demanding. While you do not necessarily have to deal with a boss, as you are your own boss, you do have to answer to different people: suppliers, customers, employees, and regulators. A small business, depending on the type and number of employees, could fall under the purview of certain local, state, and potentially even federal regulators and rule-making bodies. Money is also fundamentally important, as it is used to pay suppliers, employees, and ideally yourself; however, many small businesses struggle with cash-flow issues within their first few years. Some owners also rush into starting their own business, and do not have the financial capital to back it up, leading to cash-flow stability issues. However, even with all these issues, small businesses do account for more than 99 percent of all businesses in the
United States; therefore, being successful in operating a small business involves managing the risks involved and having a backup plan if something unexpected occurs.
DIF: Moderate
59. Discuss how the COVID-19 pandemic impacted small business owners.
ANS:
Many small businesses storefronts had to close while lockdowns were in place. Small businesses often have less capital and therefore are less able to handle the lack of income. Layoffs or furloughs impacted employees. Businesses were not able to withstand the lack of income and had to close.
DIF: Easy
60. How have technological advancements shaped the development and success of small businesses in the United States?
ANS:
Technological advancements have dramatically transformed small business operations in the United States. The personal computer revolution has allowed small firms to process data and manage information more efficiently. The rise of the internet expanded communication, sped up transactions, and enabled global reach through e-commerce platforms. Tools such as email, online marketplaces, payment processors, and social media allow even the smallest businesses to access national and international customers. Artificial intelligence now enhances customer experiences and inventory management. Together, these innovations have reduced costs, increased efficiency, and created new business opportunities that were previously unavailable.
DIF: Moderate