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
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
3) Globally, one in eight adults is actively engaged in launching a business.
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.
5) Increased entrepreneurial activity is a phenomenon unique to the U.S.
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.
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
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
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
10) Entrepreneurs are characterized by ________.
A) skill at organizing
B) desire for immediate feedback
C) high energy levels
D) All of the above
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
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
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
14) Research has isolated a set of characteristics that can predict who will succeed as an
entrepreneur.
15) Serial entrepreneurs repeatedly start businesses and grow them to a sustainable size before
striking out again.
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.
17) The opportunity to reap impressive profits is the primary motivation for most entrepreneurs.
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18) What is an entrepreneur? Give a brief profile of a typical entrepreneur. What is the primary
motivation for the typical entrepreneur?
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?
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
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
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
23) Social entrepreneurs use their skills to create profitable businesses and also to achieve
economic, social and environmental goals for the common good.
24) Technology offers a significant advantage for entrepreneurs.
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.
26) Entrepreneurs are not willing to give up a steady paycheck.
27) There is concern over the future of entrepreneurship because so few high school and college
students want to start their own companies.
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
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
30) Within five years, ________ percent of new businesses will fail.
A) 21
B) 45
C) 52
D) 65
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
32) The majority of new business owners work fewer than 40 hours per week.
33) The majority of new business owners devote more than 40 hours per week to their
companies.
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.
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
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
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.
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
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
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
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.
42) Small companies that operate globally from their inception are referred to as ________.
A) micromultinationals
B) intrapreneurial ventures
C) global companies
D) international companies
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.
44) The shift to a service economy has not had a significant impact on entrepreneurial
opportunities.
45) Cloud computing allows businesses to use a variety of applications and has reduced costs
and added flexibility.
46) Discuss the potential benefits and drawbacks of entrepreneurship.
47) Describe the factors that are driving the current entrepreneurial trend in the U.S. economy.
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
49) Women in business still experience ________ as they attempt to break the “glass ceiling.”
A) success
B) opportunities
C) discrimination
D) ease of navigation
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
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.
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.
53) ________ percent of all U.S. businesses are family-owned and managed.
A) Twenty–five
B) Fifty
C) Seventy
D) Ninety
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
55) Which of the following is not a characteristic of a successful working relationship between
copreneurs?
A) A clear definition of one partner as “boss” and the other as “subordinate.”
B) Compatible business and life goals.
C) Complementary business skills.
D) A clear division of roles and authority based on each partner’s skills and abilities.
56) Which of the following is a characteristic of copreneurs?
A) Mutual respect
B) Complementary business skills
C) A clear division of roles and authority
D) All of the above
57) Approximately ________ percent of corporate managers who are “cast off” as companies
downsize become entrepreneurs.
A) 5
B) 15
C) 20
D) 45
58) Melinda and John Perez, both corporate attorneys in New York City, have grown tired of
their lengthy daily commute, the stress of their jobs, and the overbearing policies of their
employers. They have decided to leave their six-figure jobs and together open a guide service in
Wyoming. Melinda and John are examples of ________.
A) corporate castoffs and corporate dropouts
B) corporate dropouts and copreneurs
C) corporate castoffs and copreneurs
D) copreneurs and serial entrepreneurs