Deck 7: Risk and Return

Question 1

An outcome resulting from an action is said to be certain when it will definitely happen.

Answer 1

True

Question 2

The types of loss listed in the text are:

A) Financial
B) Physical
C) Repetitional
D) Opportunistic

Answer 2

Opportunistic

Question 3

Most good entrepreneurs take any unmitigated risk available.

Answer 3

False

Question 4

Which of the following is the most uncertain task?

A) Take a job at a relatively established startup
B) Apply to college
C) Begin independent research on self-driving cars
D) Attain a diversified stock portfolio

Question 5

Regret is defined in the context of entrepreneurship as the amount of loss that a person can tolerate.

Question 6

An increased downside with a(n) ________ leads to a(n) ________

A) fixed venture value; increased upside
B) fixed upside; increased venture value
C) fixed venture value; decreased upside
D) increasing upside; decreased venture value

Question 7

Of the following combination of values, ________, ________, and ________ leads to the highest risk.

A) Low financial investment; high uncertainty; low hazard
B) High financial investment; high uncertainty; high hazard
C) Low financial investment; low uncertainty; low hazard
D) Low financial investment; high uncertainty; high hazard

Question 8

According to figure 7.1, which of the following does not factor into the perceived risk?

A) Anticipated returns
B) Hazard
C) Uncertainty
D) Outcome variability

Question 9

Which of the following is not listed as a product or process uncertainty?

A) Cost
B) Materials
C) Design
D) Channels

Question 10

Which of the following is a market uncertainty?

A) Government regulations
B) Availability of capital
C) Competitors
D) Expected ROI

Question 11

The scale of a firm is the extent of the activity of a firm as described by its size.

Question 12

Diseconomies of scale correlate with more quantities produced than economies of scale.

Question 13

When significant economies of scale exist in manufacturing, distribution, service, or other functions of a business, larger firms (up to some point) have a cost advantage over smaller firms.

Question 14

Scalability depends on a firm's ability to increase its ________.

A) Working capital
B) Capacity
C) Requirements
D) Scope

Question 15

Which of the following leads to a total cost of $100?

A) cost/unit = $20, quantity = 5, fixed cost = $5
B) cost/unit = $15, quantity = 6, fixed cost = $10
C) cost/unit = $30, quantity = 3, fixed cost = $15
D) cost/unit = $20, quantity = 4, fixed cost = $10

Question 16

For a type of business based on talent, like consulting, scalability is ________ and fixed costs are ________.

A) Medium; Low
B) High; Low
C) Medium; High
D) High; High

Question 17

"Metcalfe's law"
states that the value of a network increases with the number of participants in the network.

Question 18

Apple computers, today, would be considered a:

A) high risk investment with high annual expected returns
B) low risk investment with high annual expected returns
C) low risk investment with low annual expected returns
D) high risk investment with low annual expected returns

Question 19

The axis of the risk matrix are ________ and ________.

A) The management quality of the founders; their earlier experience in the industry
B) Whether the customer demand and market around a proposed idea are real; whether the product can actually be built as expected
C) The profitability of the idea; the timeliness of the new technology innovation
D) The degree of familiarity with the new market; degree of familiarity and its capabilities around the new product or technology

Question 20

Dropbox exhibits ________.

A) economies of scale with increasing returns
B) economies of scope with opportunity cost
C) economies of scale with static infrastructure
D) economies of scope with increasing risk