Question 1

Small businesses, by their very nature, are small and therefore do not contribute significantly to job creation.

Accepted Answer

The energy, creativity, and innovative abilities of small-business owners have resulted in jobs for many people. About 63 percent of net new jobs annually are created by small businesses.

Question 2

Manufacturing businesses are attractive to entrepreneurs because of the low start-up costs required to establish a manufacturing business.

Accepted Answer

It is expensive to start a manufacturing business, so many entrepreneurs are attracted to retailing instead. Retailing attracts entrepreneurs because gaining experience and exposure in retailing is relatively easy. Additionally, an entrepreneur opening a new retail store does not have to spend the large sums of money for the equipment and distribution systems that a manufacturing business requires.

Question 3

Trevor lives in Florida during the winter months. While in Florida, he rents out his main home in Colorado to people traveling there for the skiing season. Trevor is participating in the sharing economy.

Accepted Answer

The past few years have seen a rise in the sharing economy, an economic model involving the sharing of underutilized resources. Under this model, entrepreneurs earn income by renting out an underutilized resource such as lodging or vehicles.

Question 4

Marissa is a fitness expert who starts her own personal training company. She conducts fitness classes for women and provides personal training sessions for clients. Marissa can be regarded as a(n)

Accepted Answer

Marissa can be regarded as an entrepreneur. Entrepreneurs are people involved in entrepreneurship, which is the process of creating and managing a business to achieve desired objectives.

Question 5

A person who is involved in the process of creating and managing a business to achieve his or her desired objectives is engaged in

Accepted Answer

Entrepreneurship is the process of creating and managing a business to achieve desired objectives.

Question 6

While growing up, Carlos noticed that many families in his community struggled to make ends meet and provide for their children's education. As a result, he started a business to provide low-cost tutoring and scholarship opportunities for low-income families in his community. As his company has grown, Carlos has been able to extend free tutoring and college scholarships to five impoverished students per year. Carlos is a

Accepted Answer

Carlos is a social entrepreneur because he uses entrepreneurship to address a social problem. These entrepreneurs operate nonprofit or for-profit organizations committed to creating social change.

Question 7

Robert's Music Center is a local music shop. Along with selling musical instruments, it also rents instruments to students in school band programs. Robert is the owner and he employs three full-time and five part-time employees. Robert's business is a

Accepted Answer

A small business is defined as any independently owned and operated business that is not dominant in its competitive area and does not employ more than 500 people. A local Mexican restaurant may be the most patronized Mexican restaurant in your community, but because it does not dominate the restaurant industry as a whole, the restaurant can be considered a small business.

Question 8

Randy owns a small, local catering business. He has been hired for company picnics, backyard barbecues, and family celebrations. As word of mouth has spread about his delicious food, good service, and fair prices, he has started getting more business. To handle this, he has hired three employees to help cook and serve food at these events. What kind of entrepreneur is Randy?

Accepted Answer

Randy is a microentrepreneur because he employs five or fewer employees. Sometimes called micropreneurs, this type of business is growing rapidly.

Question 9

Dante runs Night Moves, his own DJ and party planning company. He has built a good reputation for organizing weddings and corporate events and his business has grown. He recently moved his business from his home to an office located in a corporate building and has increased his staff to 40 employees. Dante's company can be categorized as a

Accepted Answer

Dante's company can be categorized as a small business. A small business is independently owned and operated, is not dominant in its competitive area, and does not employ more than 500 employees.

Question 10

What is the purpose of the Small Business Administration?

Accepted Answer

The Small Business Administration is an independent agency of the federal government that offers managerial and financial assistance to small businesses. On its website, the SBA outlines the first steps in starting a small business and offers a wealth of information to current and potential small-business owners.

Question 11

Mahie owns an Indian restaurant that employs around 20 people. She is solely responsible for the management of the restaurant. Her business competes with a larger chain of restaurants that offers the same cuisine. Mahie's restaurant can be classified as a

Accepted Answer

Mahie's restaurant can be classified as a small business. A small business is independently owned and operated, is not dominant in its competitive area, and does not employ more than 500 employees.

Question 12

What type of business has been growing faster than other classifiable firms and represents almost 30 percent of all small businesses?

Accepted Answer

Small businesses provide opportunities for minorities and women to succeed in business. Minority-owned businesses have been growing faster than other classifiable firms, representing 28.6 percent of all small businesses.

Question 13

Baubles and Bangles, an independent jewelry store, acquires jewelry and accessories from producers and wholesalers and sells them to consumers. Baubles and Bangles is a

Accepted Answer

Baubles and Bangles is a retailer. Retailers acquire goods from producers or wholesalers and sell them to consumers. Main streets, shopping centers, and malls are generally lined with independent music stores, sporting-goods stores, dry cleaners, boutiques, drugstores, restaurants, caterers, service stations, and hardware stores that sell directly to consumers.

Question 14

If Yvette wants to start her own business, what might persuade her to open a retail operation?

Accepted Answer

Retailing attracts entrepreneurs because gaining experience and exposure in retailing is relatively easy. Additionally, an entrepreneur opening a new retail store does not have to spend large sums of money for the equipment and distribution systems that a manufacturing business requires. However, it is important for entrepreneurs to anticipate the costs of opening a retail business beforehand.

Question 15

Clarissa makes one-of-a-kind ceramic vases. To avoid the costs of opening a store, she sells these pieces on Etsy. This is an example of

Accepted Answer

This is an example of direct marketing, which gives consumers the opportunity to place orders by mail, telephone, or the Internet. This is a type of nonstore retailing, which provides a great opportunity for entrepreneurs because of the lower cost of entry. Smaller business can engage in direct marketing by featuring their products on eBay, Amazon, and Etsy.

Question 16

A clothing store located in a shopping mall wants to give customers an opportunity to place orders. What is one form of direct marketing the store can use to provide this service?

Accepted Answer

A direct marketing activity the store can use to encourage customers to order its clothing by mail, telephone, or the Internet is sending catalogs to its customers. Market research findings suggest that catalog users are more inspired to purchase items online.

Question 17

While Justin attends college, he is working part-time for a cutlery company. He goes door-to-door and offers consumers face-to-face presentations in their homes. This is an example of

Accepted Answer

This is an example of direct selling, which involves the marketing of products to ultimate consumers through face-to-face sales presentations at home, in the workplace, and in party environments. Many people view direct selling as a part-time business opportunity.

Question 18

All of the following are true of direct selling EXCEPT

Accepted Answer

The cost of getting involved in direct selling is low and often involves buying enough inventory to get started. Many people view direct selling as a part-time business opportunity. Often, those who become involved in direct selling are enthusiastic about the product and have the opportunity to recruit other distributors and receive commissions on their sales.

Question 19

What is true of wholesalers?

Accepted Answer

Wholesalers provide goods and services to producers and retailers. Their activities include planning and negotiating for supplies, promoting, distributing, and providing management and merchandising assistance to clients. Wholesalers are extremely important for many products because of the marketing activities they perform. Wholesalers can be eliminated, but their functions must be passed on to some other organization or intermediary.

Question 20

Walt owns a business in which he offers standardized test preparation classes and individual tutoring for students. This is an example of a

Accepted Answer

This is a service business because it does not produce tangible goods. The service sector accounts for 80 percent of U.S. jobs, excluding farmworkers. Real estate, insurance and personnel agencies, barbershops, banks, television and computer repair shops, copy centers, dry cleaners, and accounting firms are all service businesses.

Quiz 5: Small Business, Entrepreneurship, and Franchising