Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
Chapter 10: Creating Revenue Models
Test Bank
Multiple Choice
1. Revenue can be described as which of the following?
a. all the money that a company has to work with
b. the money from loans, sales, and contributions
c. money gained from the sale of goods or services
d. money gained from sales minus the cost of creating the goods
2. A business model:
a. means the same thing as a revenue model
b. focuses on how the product or service will serve a market need
c. determines how profits will be made
d. determines how revenue will be earned
3. Which of the following is true about a revenue model?
a. It is the same as a business model.
b. It is a separate planning model from the business model.
c. It is minor component of the business model.
d. It is a key component of the business model.
4. Which of these questions will not provide information for the revenue model?
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
a. How will my service add value to my customer?
b. How much will my customers be willing to pay?
c. How many customers do I need?
d. How much cash can be generated from sales?
5. How does Chicago Food Planet Food Tours and Food Tour Pros generate revenue?
a. food tasting tours and business courses for entrepreneurs
b. business courses and entrepreneur courses
c. travel and food tasting
d. food tasting tours and cooking lessons
6. If a company has more than one revenue stream, what must the entrepreneur ask in
relation to revenue?
a. How many customers will I need for each stream?
b. How much will each revenue stream contribute to total revenue?
c. How many more revenue streams will I need?
d. Will my revenue streams compete with each other?
7. A company’s plan for how it will earn income and generate profits is called the
_____________.
a. revenue model
b. business model
c. revenue stream
d. business plan
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
8. Google’s “cost-per-click” model is a type of __________ revenue model.
a. franchising
b. licensing
c. advertising
d. data
9. Tony owns a bicycle shop where he sells bicycles, repairs them, and sells
accessories. How many revenue streams does Tony’s business have?
a. one
b. two
c. three
d. it cannot be determined
10. Different revenue streams may affect which of the following:
a. the industry your company operates in
b. the geography your company will operate in
c. who your customers will be
d. all of these
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
11. This revenue model measures the amount of revenue generated by the number of
items sold by the company.
a. razor-and-razor-blade
b. unit sales
c. data revenue
d. intermediation
12. Cylle installs a unique home entertainment center. He charges a flat fee of $1,200
for the system and the installation. What revenue model does Cylle employ?
a. razor-and-razor-blade
b. unit sales
c. data revenue
d. Intermediation
13. What can be sold as unit sales?
a. food and beverages
b. digital products
c. software support offered by the hour
d. all of these
14. Which of the following would be considered an intangible?
a. clothing
b. food
c. hardware
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
d. iTunes download
15. The razor-and-razor-blade revenue model:
a. includes tangible and intangible sales
b. involves offering an item at no or low-cost to encourage the sale of expensive
complementary or disposable products later
c. involves the sale of a high-cost product with easy-to-replace parts
d. includes additional products as an add-on to the sale
16. Brent has designed a barbeque smoker that will sell for $29.99 and appeal to
campers. The product includes a disposable unit that will protect the food during
smoking and make cleanup easier. What revenue model is Brent planning on?
a. intermediation
b. razor-and-razor-blade
c. intangible sales
d. subscription
17. Carol sells a downloadable product that uses bar codes to conduct comparison
shopping. Carol’s product is an example of:
a. a tangible revenue model
b. an intangible sale
c. a data revenue model
d. a licensing revenue model
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
18. Why is the razor-and-razor-blade model also known as the printer-and-ink model?
a. the technique is only used by printing companies
b. the razor blade is not used that much
c. the printer is sold at a low cost, but ink or toner is priced much higher
d. printers are expensive, but ink is readily available
19. Intermediation revenue is associated with:
a. direct buyer-seller relationships
b. the use of third parties (or “middlemen”)
c. repeat sales
d. dispute management
20. Airbnb is considered an intermediation revenue model because:
a. they help people in a real-estate-related industry
b. they advertise on behalf of the homeowner/renter
c. they charge commission for connecting home renters and home owners
d. they are purely web-based
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
21. Which of the following is the role of the broker in an intermediation revenue model?
a. sell to the ultimate buyer
b. organize transactions between buyer and seller
c. represent the buyer in legal cases
d. represent the seller in legal cases
22. What are the two revenue sources of Airbnb?
a. air travel and gambling
b. commission from the homeowner and a booking fee from visitors
c. commission on the booking fee
d. advertisement of the rooms
23. The revenue model associated with giving permission to other parties to use
protected intellectual property in exchange for fees is called:
a. fee revenue model
b. licensing revenue model
c. intellectual property model
d. intermediation model
24. A popular sports company grants a license to people who use their logo on T-shirts
and caps. They charge the company for the rights to use the logo. This is an example of
which of the following revenue models?
a. advertising revenue model
b. intermediation revenue model
c. licensing revenue model
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
d. razor-and-razor-blades model
25. Pam developed an application for the iPhone that Apple sells to their customers.
Through what revenue model does Pam get revenue?
a. licensing revenue model
b. intermediation
c. copyright
d. advertising revenue model
26. Which of the following might be used with permission in a licensing revenue model?
a. copyrights
b. patents
c. trademarks
d. all of these
27. In which revenue model do third parties such as brokers generate money?
a. intermediation revenue model
b. licensing revenue model
c. franchising revenue model
d. professional revenue model
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
28. In which revenue model does an existing business allow another party to trade
under the name of that business?
a. an intermediation revenue model
b. a franchising revenue model
c. a brokerage model
d. an advertising model
29. What is a likely reason why someone would pay money for a franchise?
a. they are not aware of basic business practices
b. they will not have to spend the same amount of time marketing and building the
brand
c. they do not have knowledge in the industry or business model
d. they will not have to work as hard in running the business
30. Clinton owns a popular coffee shop in downtown Seattle. Rather than open up a
second shop, he allows another business owner to use his company name and follow
the same operations. The second business owner, in turn, pays him an initial monthly
fee for operational support and the use of the company name. What revenue model
does this represent?
a. intermediation model
b. franchising model
c. licensing model
d. professional revenue model
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
31. This revenue model involves charging customers to gain continuous access to a
product or service:
a. licensing revenue model
b. franchising revenue model
c. revolving revenue model
d. subscription revenue model
32. Massage Envy, a franchised spa offering massages and facials, offers discounts for
people who automatically purchase a monthly service or services. What revenue model
does this represent?
a. licensing revenue model
b. franchising revenue model
c. revolving revenue model
d. subscription revenue model
33. This revenue model provides professional services on a time and materials contract.
a. contractor revenue model
b. utility and usage revenue model
c. professional revenue model
d. franchising revenue model
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
34. Joe owns a construction company and prices his services based on labor hours and
the cost of material. Which of the following revenue models is Joe using?
a. contractor revenue model
b. utility and usage revenue model
c. professional revenue model
d. franchising revenue model
35. This revenue model charges customers fees based on how often goods or services
are used:
a. contractor revenue model
b. utility and usage revenue model
c. professional revenue model
d. franchising revenue model
36. A mobile telephone company charges a base fee plus additional minutes for data
usage. What revenue model is demonstrated in this example?
a. contractor revenue model
b. utility and usage revenue model
c. professional revenue model
d. franchising revenue model
37. This revenue model mixes free basic services with premium or upgraded services:
a. utility and usage revenue model
b. professional revenue model
c. freemium revenue model
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
d. premium revenue model
38. Myhours.com offers a free individual time reporting system. However, it charges for
additional users and services. This is an example of which of the following revenue
models:
a. utility and usage revenue model
b. professional revenue model
c. freemium revenue model
d. premium revenue model
39. What is the primary source of revenue for Skype, a company that offers free online
video and phone service?
a. the money they charge for a connection
b. the money they charge for Skypeout, the service that calls land lines and cell phones
c. the long-distance fees
d. the monthly subscription fee
40. How do companies gain revenue from free products under the freemium model?
a. They operate as nonprofits.
b. They are sponsored by wealthy sponsors.
c. The revenue earned from other sources supports the free side of the business.
d. They get donations from users.
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
41. How do free newspapers like Metro gain revenue from free products under the
freemium model?
a. they operate as nonprofits
b. they are sponsored by wealthy sponsors
c. they are paid to feature advertisements
d. they get donations from users
42. Which of the following refers to pricing a product or service above its market value
to cover the cost of giving a product away for free or for a marked discount?
a. direct cross-subsidies
b. price plus
c. freemium plus
d. BOGO pricing
43. A cell phone company offers a promotion in which they give away a free phone to
people who purchase the highest-level data usage plan. This is an example of which of
the following?
a. balance subsidies
b. promotional subsidies
c. direct cross-subsidies
d. risk reduction subsidies
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
44. What is the main reason customers are attracted to direct cross-subsidies?
a. they get two products for the price of one
b. it eliminates the upfront cost of a product or service
c. it is the most cost-effective model
d. they rarely calculate the true costs
45. A popular restaurant offers a free meal. At the restaurant, it turns out that drinks are
not included. The drinks sell for above market rates. This is an example of which of the
following?
a. direct cross-subsidies
b. multiparty markets
c. double whammy
d. distributed pricing
46. Which of the following refers to the model that gives the product away to one party
but charges another party?
a. dual system
b. multiparty business
c. single-party marketing
d. double-bind pricing
Instructor Resource
Neck, Entrepreneurship
SAGE Publishing, 2018
47. A Las Vegas theater offers a free performance. There is a two-drink minimum. This
is an example of what strategy?
a. value-based pricing
b. direct cross-subsidies
c. multiparty
d. utility and usage
48. Profit will depend primarily on which of the following?
a. the amount of revenue that your company can bring in
b. both revenue and cost
c. the value of the company
d. the number of customers generated
49. What is the first key driver of revenue?
a. price
b. selling process
c. customer
d. frequency
50. The four elements of revenue are:
a. customers, frequency, selling process, price
b. profit, sales, employees, selling process
c. selling process, price, employees, profit
d. customers, revenue streams, frequency, price