46. The industry concerned with the movement of goods from producer to consumer is
a. service.
b. distribution.
c. production.
d. agriculture.
e. wholesaling.
47. Which of the following would most likely be classified as a distribution industry?
a. Subassembly plant
b. TV repair shop
c. Insurance agency
d. Grocery store
e. Medical office
48. Production industries make up approximately what percentage of all small businesses?
a. 5
b. 10
c. 19
d. 31
e. 41
49. Of the small businesses in the distribution industry, nearly three-quarters of them are involved in
a. wholesaling.
b. purchasing.
c. service.
d. retailing.
e. communications.
50. Joe decides to start his own business designing websites for other businesses. Joe’s business would be classified as
a
a. distribution business.
b. retailer.
c. production business.
d. wholesaling business.
e. service business.
51. Megan’s business sells souvenirs and craft items to tourists in Myrtle Beach, South Carolina. This is an example of
a business.
a. service
b. communication
c. production
d. distribution
e. wholesaling
52. Nathan’s business constructs storage sheds for new housing developments as requested by the builders. Nathan’s
business would best be classified as a
a. service business.
b. retailer.
c. distribution business.
d. production business.
e. wholesaler.
53. Which of the following is the most likely example of a production industry?
a. Wholesale outlet
b. Retail outlet
c. Financial enterprise
d. Subassembly plant
e. Transportation company
54. Dana owns and operates a catering business. This is an example of a
a. distribution business.
b. production business.
c. service business.
d. retailer.
e. manufacturer.
55. The main reason there are fewer production industries than distribution or service industries is that
a. there are few things production industries manufacture.
b. production industries have no market.
c. production industries need a large initial investment.
d. there is little chance for profit in production industries.
e. few people want to work in production industries.
56. Which of the following is the most likely example of a production industry?
a. Telephone company
b. Movie theaters
c. Financial enterprise
d. Subassembly plant
e. Transportation company
57. Small businesses are typically managed by
a. relatives.
b. professional managers.
c. friends.
d. the people who start and own them.
e. a board of directors.
58. Kim Nguyen is planning to open a boutique stocked with exotic imports from around the world. Most probably, this
new business will be managed by
a. Kim Nguyen.
b. her friends.
c. her relatives.
d. a professional manager.
e. her family.
59. An individual’s desire to create a new business is referred to as
a. the entrepreneurial spirit.
b. the desire for ownership.
c. self-determination.
d. self-evaluation.
e. the laissez-faire spirit.
60. Megan always knew she wanted to start her own business. She was very passionate and wanted to create
something new. Megan‘s primary motivation for starting her own business is
a. her need for independence.
b. her entrepreneurial spirit.
c. her desire to determine her own destiny.
d. the lack of good jobs in other companies.
e. her background with her family.
61. By age 26, Tom was a plant manager in the snack-foods division. By 33, he headed the division, one of the most
profitable in the corporation. Eventually, however, the company decided to move its corporate offices. Although he
loved the job and thought the work was great, Tom’s lifestyle was awful. He was on the road so often that he was
giving up much of his family life. Tom had also become disenchanted with corporate life. He saw that the closer
one got to the top, the more vulnerable one‘s position became. Thus, Tom left the corporation to start his own
snack-foods company. His thoughts and actions most clearly reveal his
a. entrepreneurial spirit.
b. need for independence.
c. desire to determine his own destiny.
d. willingness to find and accept a challenge.
e. lack of self-confidence.
62. Which of the following is not a reason for starting a small business?
a. Desire to determine one‘s own destiny
b. Willingness to find and accept a challenge
c. Desire for a guaranteed financial return
d. Desire for independence
e. Desire to create a new business
63. All of the following are reasons people go into business except the
a. desire to create a new business.
b. willingness to accept a challenge.
c. guaranteed return on investment.
d. desire for independence.
e. desire to determine one’s own destiny.
64. Which of the following statements is correct?
a. The risk of failure for women-owned businesses is lower than average.
b. Women are starting businesses at about the same rate as men.
c. Women are almost always sure to succeed.
d. Women own 7.7 million businesses in the United States.
e. Minority business owners pay lower federal tax on profits than men do.
65. Steven Jobs and David Wozniak, the founders of Apple Computer, Inc., are creative, free-spirited individuals who
decided that being corporate underlings was not what they wanted from a career. They had an innovative idea for a
product and desired to create their own business based on this idea. All of the following are factors that could have
led them to go into business except
a. the independence.
b. the willingness to find and accept a challenge.
c. the desire to determine their own destiny.
d. the low risk and high rewards inherent in entrepreneurship.
e. entrepreneurial spirit.
66. Which of the following statements is true regarding the profitability of new businesses?
a. It may take several years for a new business to begin showing a profit.
b. Profitability is not an important issue for new businesses.
c. Most new businesses will turn a profit within the first year.
d. If a company does not show a profit within the first year, it will fail.
e. Most new businesses are highly profitable when they first start.
67. What is a common mistake that small-business owners make when their businesses begin growing?
a. They sell more goods and services.
b. They put too much money in advertising.
c. They move beyond their local area.
d. They overexpand without proper planning.
e. They invest too much of their own money.
68. Janis starts a small quilting and embroidery business. She purchases a technologically advanced quilting machine
and an embroidery machine for a combined $25,000. Her monthly payments on the equipment are $500, but she has
only one client at this time. Janis is facing a potential
a. inventory flow problem.
b. cash-flow problem.
c. competitive advantage.
d. overexpansion problem.
e. advertising issue.
69. Lauren starts a business that sells personal computers. Within the first year she discovers that computer technology
becomes outdated very quickly, and she has not been able to sell her products for as much as she thought due to
the passage of time. Lauren has mismanaged
a. inventory.
b. cash flow.
c. financing arrangements.
d. personnel.
e. money.
70. Imagine that you want to open your own small business. You will probably be most concerned with having
a. a lot of inventory in the warehouse on opening day.
b. a really good lawyer and an even better accountant.
c. the best Madison Avenue ad agency money can buy.
d. a good source of capital and good management skills.
e. a top-notch marketing consultant and a lot of inventory in the warehouse.
71. A new small business, Underwater Wildlife, has opened to sell tours of underwater sites around the country and in
South America. However, money has to be paid up front by the Underwater staff to book hotels and other travel
arrangements before its clients have paid for the tours. That means Underwater is facing a potential
a. insurance difficulty.
b. cash-flow problem.
c. inventory-flow problem.
d. business plan crunch.
e. employee expansion task.
72. You have just opened a new small business. You‘re really happy to learn that studies show that small-business
workers
a. don’t really like bill collectors much.
b. are more innovative than workers in large businesses.
c. are especially good at handling inventories in the warehouse to avoid damage and spoilage.
d. design ad campaigns that work especially well on network television.
e. pay little attention to their salary levels compared to similar workers in small businesses.
73. The fact that insulin and power steering both originated with individual inventors and small companies is testimony
to the power of small businesses as providers of
a. employment.
b. competition.
c. technical innovation.
d. capital.
e. quality products.
74. New ways to do a job with less effort and at lower cost is the basic principle characterizing the
a. increases in productivity for the past two hundred years.
b. great desire to be an entrepreneur.
c. motivation for owning a business.
d. American way of life.
e. way small businesses fill the needs of other businesses.
75. Small businesses have traditionally added new jobs to the economy.
a. more than their proportional share of
b. less than their proportional share of
c. very few
d. the highest paying
e. the vast majority of
76. Which of the following statements is not true about small businesses?
a. Small businesses provide technical innovation.
b. Small businesses create cyclical unemployment.
c. Small businesses provide employment.
d. Small businesses provide competition.
e. Small businesses fill the needs of society and other businesses.
77. Penicillin, airplanes, and air conditioning were all
a. invented in the nineteenth century.
b. invented by Russians.
c. created through government-sponsored research.
d. created by individual inventors and small companies.
e. created by large corporations.
78. Many small firms seek to establish a particular niche in the market, realizing that they cannot afford to operate on a
larger scale without exposing themselves to considerable risk of retaliation from larger companies. When a number
of small businesses are operating in this manner, they are forcing the larger businesses to recognize and account for
their influence on the market. In this way, small businesses are primarily
a. fostering competition.
b. providing technical innovation.
c. creating jobs.
d. satisfying the needs of other businesses.
e. avoiding competition.
79. Large firms generally buy parts and assemblies from smaller firms because
a. doing so creates goodwill.
b. they are required to do so by government regulations.
c. they can control small businesses this way.
d. it is less expensive than making their own.
e. large firms want to keep small firms in business.
80. In her small retail shop, Jocelyn knows most of her best customers by name and knows their preferences in clothing
and shoes. This demonstrates which advantage of a small business?
a. Ability to adapt to change
b. Independence from customers’ desires
c. Simplified record keeping
d. Personal relationships with customers
e. Small customer base
81. A friend of yours has recently received his MBA. He wants to open his own business but feels that it might be too
risky at this point in his career. As an SBA counselor, you are able to advise him and explain more clearly to him
some of the advantages and disadvantages of starting a small business. Which of the following statements best
represents something you might tell him?
a. Although opening a small business is risky, there is practically unlimited potential.
b. The cost of opening a small business is relatively low, and financing is easily obtained.
c. Record keeping will be complicated, and public disclosure of most transactions is required.
d. Small businesses foster personal relationships and offer flexibility and independence.
e. Opening a small business is especially difficult because there is little help available for those desiring to do so.
82. What is the main advantage of small business that helps retain effective employees who could earn more at a larger
firm?
a. Better pay and employee benefits
b. Ability to adapt to change
c. Simplified record keeping
d. Limited ability to raise capital
e. Personal relationships with employees
83. Victor owns his own motorcycle and ATV store. He notices that many of his customers talk about golf while in his
store. He quickly adds golf carts and golf clubs to his merchandise selection. Rapidly adjusting to the needs of his
customers is possible because small businesses
a. have personal relationships with their customers.
b. have the ability to quickly adapt to change.
c. are independent.
d. have simplified record keeping.
e. run the risk of failure.
84. The Hamptons enjoy owning and operating their own restaurant. They enjoy being the masters of their own
destinies and closing down the restaurant for one week a year so that they can take a vacation. The Hamptons
seem to enjoy which advantage of a small business?
a. Limited potential
b. Personal relationships with customers
c. Independence
d. Personal relationships with employees
e. Ability to adapt to change
85. John and Ruby Couch just opened a computer store in a small community. Before opening the store, they listened to
their SBA counselor’s warnings about the importance of having balanced experience, that is, marketing, finance,
and personnel experience in the computer-store business because
a. their business is unlikely to grow and earn large business profits.
b. the computer-store business is a fad.
c. management know-how is insignificant to small-business success.
d. small businesses survive large businesses by three years.
e. about two out of three small firms close within five years of their founding.