Entrepreneurship and Small Business Management, 2e (Mariotti)
Chapter 5 Creating Business from Opportunity
1) Business leaders create wealth by ________.
A) Hiring employees in order to sell more units and generate more profit
B) Reducing their gross margins
C) Charging high prices to customers
D) Avoiding the cost of hiring employees
E) Putting competitors out of business
Learning Obj.: LO 4
AACSB: Analytical thinking
2) Your ________ is a concise communication of your strategy including your business
definition and your competitive advantage.
A) Mission statement
B) Target market analysis
C) Values statement
D) Business plan
E) SWOT analysis
Learning Obj.: LO 2
AACSB: Analytical thinking
3) A(n) ________ is a group of people or organizations that may be interested in buying a given
product or service, has the resources to purchase it, and is permitted by law and regulation to do
so.
A) Target market
B) Market
C) Organization
D) Industry
E) All of the above
Learning Obj.: LO 1
AACSB: Analytical thinking
1
4) A retail business buys from ________ and sells to ________.
A) Wholesalers, consumers
B) Wholesalers, manufacturers
C) Manufacturers, consumers
D) Traders, consumers
E) Vendors, consumers
Learning Obj.: LO 1
AACSB: Analytical thinking
5) ________ is/are the core values of an organization in action.
A) Culture
B) Mission
C) Vision
D) Goals
E) None of the above
Learning Obj.: LO 2
AACSB: Analytical thinking
6) What is the average unit of sale for a restaurant that serves $3,250 per day in meals to 200
customers per day?
A) $16.25
B) $20.00
C) $18.05
D) $17.25
E) $14.00
Learning Obj.: LO 4
AACSB: Analytical thinking
7) Which of the following is not a strong method of identifying business opportunities?
A) A person has a talent for making something and decides that they should go into business.
B) Searching through a process of identification and selection starting with research on “hot”
businesses or growth areas.
C) Searching through a process of identification and selection beginning with self-developed (or
group-developed) ideas.
D) All of the above
E) None of the above
Learning Obj.: LO 2
AACSB: Analytical thinking
2
8) To help determine whether your business will be profitable, calculate your ________.
A) Economics of one unit
B) Finances of one unit
C) Cost of goods sold
D) Rate of goods sold
E) The difference between the costs and profits for one unit
Learning Obj.: LO 4
AACSB: Analytical thinking
9) For your business to be successful you will need a strategy for beating the competition, that is,
a ________.
A) Competitive advantage
B) Market analysis
C) Target market
D) Customer analysis
E) Competitive benefit
Learning Obj.: LO 2
AACSB: Analytical thinking
10) Business definition + Competitive advantage is ________.
A) Competitive strategy
B) Competitive plan
C) Competitive approach
D) Competitive tactics
E) Business mission
Learning Obj.: LO 3
AACSB: Analytical thinking
11) Which of the following items is not a competitive advantage?
A) Consistently providing better customer service than the competition
B) Using a new patented manufacturing process that reduces manufacturing costs by 25%
C) Finding a better supplier at a lower cost
D) Cutting costs on shipping by 50%
E) Offering free samples during a two-week promotion
Learning Obj.: LO 3
AACSB: Analytical thinking
3
12) A typical unit of sale for a wholesaler would be ________.
A) One hour of work
B) A block of time devoted to a task
C) One item
D) One dozen
E) All of the above
Learning Obj.: LO 4
AACSB: Analytical thinking
13) Average gross profit per customer is ________.
A) Average sale per customer minus average cost of sale per customer
B) Average cost of tangible product minus average cost of intangible product
C) Average sale per consumer plus average sale per wholesaler
D) Average cost of sale minus average sale per customer
E) Average cost of sale multiplied by average sale per customer
Learning Obj.: LO 4
AACSB: Analytical thinking
14) The foreign exchange rate is ________.
A) The relative value between one currency and another
B) The relative value between the dollar and foreign currencies
C) The rate at which countries do business
D) The value of products within a country
E) The rate of trade
Learning Obj.: LO 4
AACSB: Analytical thinking
15) Total cost of goods sold per unit consists of ________.
A) Materials cost per unit plus labor cost per unit
B) Volume cost plus labor cost
C) Selling price per unit plus gross profit per unit
D) Labor cost minus volume discount per unit
E) None of the above
Learning Obj.: LO 4
AACSB: Analytical thinking
4
16) The cost of producing one additional unit of a product is called ________.
A) Cost of goods sold
B) Cost of materials
C) Cost of services sold
D) Cost of utilities
E) Cost of lease
Learning Obj.: LO 4
AACSB: Analytical thinking
17) Total gross profit = ________.
A) Total cost of goods sold – Total revenue
B) Total profit – Total revenue
C) Total revenue – Total cost of goods sold
D) Total revenue – Total profit
E) None of the above
Learning Obj.: LO 4
AACSB: Analytical thinking
18) A ________ is a group of people who would be interested in buying a given product or
service.
A) Market
B) Target
C) Customer
D) Consumer
E) Shopper
Learning Obj.: LO 1
AACSB: Analytical thinking
5
19) Trey has a T–shirt business that buys shirts from a wholesaler for four dollars each and sells
them to retailers for eight dollars each. He imprints each shirt with a picture of a musical artist
that costs him two dollars. He also pays his cousin to do the printing at five dollars an hour.
LaShawn prints five shirts per hour. A retailer offers to buy 1000 shirts at seven dollars each.
Should Tray agree to the deal?
A) Yes, Tray will make a profit of one dollar per shirt.
B) Yes, Tray will make a profit of two dollars per shirt.
C) No, Tray will not make a profit at this price.
D) No, Tray’s profit at this price is too small.
E) None of the above
Learning Obj.: LO 4
AACSB: Analytical thinking
20) To succeed, a business must satisfy a consumer need ________.
A) At a price consumers can afford
B) At a price that covers the business’s costs
C) At a price that provides the business with a profit
D) At a price that covers variable costs
E) At a price that matches your competitors
Learning Obj.: LO 3
AACSB: Analytical thinking
21) What type of business deals in tangible products?
A) Service
B) Manufacturing
C) Agricultural production
D) All of the above
E) None of the above
Learning Obj.: LO 1
AACSB: Analytical thinking
6