Question 1

In rural areas electrical power is often sold by ____________ that take advantage of the government's policy to sell them electricity at wholesale rates.
A)franchises
B)limited partnerships
C)mutual funds
D)cooperatives

Accepted Answer

Cooperatives are often formed in rural areas to provide electrical power. They take advantage of the government's policy to sell them electricity at wholesale rates and then sell the electricity to their members at a retail price. This allows rural residents to have access to electricity at a reasonable cost.

Question 2

A distinguishing feature of a cooperative is that it:
A)Maintains a distinct separation between ownership and management.
B)Is only intended to operate for a limited period of time.
C)Is owned and operated by the people who use it.
D)Can have no more than 75 owners,all of whom must be citizens of the United States.

Accepted Answer

A cooperative is owned by its users or members, who share in the profits and decision-making of the organization. This distinguishes it from other forms of businesses where ownership and management may not be directly connected to the users or customers.

Question 3

Greg plans to open up three Hottie Pata`tee franchises in the greater Denver are A.He just informed you that he plans to negotiate with the franchisor to eliminate the Big Potato Head that graces the roof of these restaurants.Greg is likely to learn that:
A)The parent company will give him a start-up cost break for the same amount that it would have to pay for three of these signs.
B)He is making a smart decision because it is not the sign that will bring customers to his potato bar.It is the wide-selection of toppings and six different ways he will cook potatoes.
C)It is non-negotiable due to company rules.
D)His failure rate will not increase or decrease because franchises traditionally have low failure rates.

Accepted Answer

The elimination of the Big Potato Head sign is likely non-negotiable due to company rules. The franchisor may have specific requirements for the appearance of their franchises in order to maintain consistency and brand recognition. Greg may need to accept this rule or consider a different franchisor if he is insistent on removing the sign.

Question 4

Some __________ ask members/customers to work at the organization for a number of hours a month as part of their duties.
A)franchises
B)limited partnerships
C)mutual funds
D)cooperatives

Accepted Answer

Cooperatives are organizations owned and operated by their members. One of the unique features of cooperatives is that they often require members to contribute labor as part of their membership. This can include working at the cooperative for a certain number of hours each month or year. This helps keep costs down and build a strong sense of community among members.

Question 5

Sierra is interested in becoming a franchise owner,by opening and operating one of 50 Cactus Katie's Grills,a very successful fast food chain specializing in food dishes from the American southwest.Which of the following problems is Sierra most likely to encounter if she agrees to become a franchisee?
A)High initial costs and fees
B)Poor name recognition and visibility
C)Lack of financing
D)Lack of managerial assistance

Accepted Answer

The most common issue for franchisees is the high initial investment and ongoing fees associated with operating the franchise. This can include costs for equipment, inventory, franchising fees, and ongoing royalties. Poor name recognition and visibility, lack of financing, and lack of managerial assistance may also be issues, but they are typically not as significant as the financial burden of becoming a franchisee.

Question 6

The purpose of a farm cooperative is to:
A)Give members more economic power as a group than they would have as individuals.
B)Give each farm an equal share in the running of the cooperative.
C)Equalize the members' standard of living.
D)Allow socialism a foothold in the U.S.

Accepted Answer

The purpose of a farm cooperative is to give members more economic power as a group than they would have as individuals. By coming together and pooling their resources, farmers can negotiate better prices for their products and buy supplies in bulk at a lower cost. This helps them stay competitive in the market and increase their profits. The cooperative also provides other services such as marketing, financing, and technical assistance, which are often not available to individual farmers.

Question 7

Which of the following people would be most interested in participating in a business organized as a cooperative?
A)Joe is intrigued by the idea of combining his time and resources with many other people to operate a business providing a good or service that they all will use.
B)Joan wants to be an owner of a business and share in its profits,but has no desire to take an active role in managing the company or participating in its daily operations.
C)Jeff wants to work for a government-owned business because he believes government ownership ensures a more equitable distribution of income and wealth.
D)Jennifer prefers to work for a charitable organization that emphasizes helping people who are less fortunate than she is.

Accepted Answer

Joe would be most interested in participating in a business organized as a cooperative since he is intrigued by the idea of combining his time and resources with many other people to operate a business providing a good or service that they all will use. Cooperatives are businesses owned and controlled by the people who use their services, and they typically operate for the benefit of their members.

Question 8

In the Thinking Green box titled,"Play Ball but Play Green",The Washington Nationals baseball team is featured as a franchised business that demonstrates environmental stewardship by:
A)Replacing all sod in the stadium with astro-turf to conserve water.
B)Building a LEED certified building and initiating recycling programs.
C)Joining several other baseball franchises and only washing uniforms in phosphate-free detergents because the run-off eventually ends up in our drinking water supply.
D)Painting the steel beams and seats in the stadium "green" and continuously flashing the words "green" on the display monitors to remind everyone to use the waste cans and to clean around their seats before departing the stadium.

Accepted Answer

The Washington Nationals baseball team is featured as a franchised business that demonstrates environmental stewardship by building a LEED certified building and initiating recycling programs. This shows the team's commitment towards reducing their environmental impact by ensuring sustainable practices within the organization.

Question 9

Marco is a franchisee with Daggies,a chain of sandwich shops.His business was doing well until several Daggies franchisees got in trouble and were forced to close their shops.Soon afterward,Marco's business deteriorated and he too was forced to close.This is an example of:
A)An economic shakeout at work.
B)The coattail effect.
C)The law of diminishing returns.
D)Management by exception.

Accepted Answer

The coattail effect refers to the negative impact on successful franchisees when other franchisees within the same chain fail or perform poorly. In this case, Marco's business was negatively affected by the closures of other Daggies franchisees.

Question 10

Which of the following statements about farm cooperatives is most accurate? Farm cooperatives have:
A)Declined in importance in recent years.
B)Become a major force in American agriculture.
C)Run afoul of U.S.antitrust laws in recent years.
D)Increased in number,but decreased in size in recent years.

Accepted Answer

Farm cooperatives have become a major force in American agriculture, with over 2,000 existing in the United States today. They provide services such as marketing, financing, and purchasing inputs for their members. While there have been some antitrust concerns in the past, they remain an important aspect of the agricultural industry.

Question 11

A ___________ is an organization that is owned and controlled by the people who use it-producers,consumers and workers with similar needs pool their resources for mutual gain.
A)corporation
B)limited partnership
C)mutual fund
D)cooperative

Accepted Answer

A cooperative is an organization that is owned and controlled by its members who are typically producers or consumers with similar needs. The members pool their resources and share risks and benefits for mutual gain. This type of organization is different from a corporation or limited partnership, which are owned by shareholders or partners who may not have a direct relationship with the business. A mutual fund is a type of investment vehicle that pools money from many investors to purchase securities.

Question 12

Midas Muffler sells franchises to prospective businesspersons who want to use the Midas name and offer Midas products.In a franchise arrangement,Midas would be the __________,and the buyer of the franchise is the __________.
A)owner;limited partner
B)co-signer;co-signee
C)franchisor;franchisee
D)franchisee;franchisor

Accepted Answer

In a franchise arrangement, the franchisor is the company that grants the franchise to a buyer, while the buyer of the franchise is the franchisee. Therefore, the best choice is C.

Question 13

Which of the following statements about operating a U.S.-based franchise in a foreign country is most accurate?
A)U.S.-based franchises are most likely to succeed in a foreign market if they use the same strategies and procedures used by franchises in the United States.
B)There are limited opportunities for U.S.-based franchises to open in foreign countries because,aside from Canada,Mexico,and a small number of European countries,most foreign nations do not allow American-owned franchises to operate within their borders.
C)The operating costs for franchises in foreign countries may be fairly high,but chances for success are quite good,because competition is likely to be less intense and the customer base in many foreign countries is expanding.
D)It is difficult for U.S.-based franchises to succeed in most foreign countries because the low incomes of most households in these countries result in weak demand.

Accepted Answer

While it may be tempting for U.S.-based franchises to replicate the strategies and procedures used in the United States, it is important to consider the cultural and economic differences in foreign countries. However, there are many opportunities for U.S.-based franchises to expand globally, as many countries are eager for foreign investment and the customer base in many foreign countries is growing. While operating costs may be higher in some cases, competition may be less intense in these markets. Low incomes in some countries may be a challenge, but there are still opportunities for franchises that can offer affordable products or services.

Question 14

Twenty-six years ago,several small vineyard owners in California joined voluntarily to market their grapes and wine in an attempt to get better prices.Over the years they expanded the organization to include other services such as buying and selling farm supplies and equipment and providing financial and technical services.The arrangement established by these vineyard owners is an example of an):
A)Closed corporation.
B)Joint venture.
C)Limited agricultural partnership.
D)Farm cooperative.

Accepted Answer

The arrangement established by the vineyard owners is an example of a farm cooperative, where members voluntarily join to market their products and provide other services.

Question 15

People who form cooperatives:
A)Believe the government should play a larger role in the economy.
B)Dislike the notion of having owners,managers,and customers as separate individuals with separate goals.
C)See competitive behavior as the key to ensuring rapid economic growth.
D)Want to find a way to supply basic necessities free of charge to everyone.

Accepted Answer

Cooperatives are formed by individuals who believe in working together towards a common goal instead of following the traditional model of separating owners, managers, and customers. They value cooperation over competition and prioritize the well-being of their members over profit. Cooperatives can range from small community initiatives to large global corporations.

Question 16

Jenna plans to invest in a cleaning service franchise called "Spare Time".At her first interview with the franchisor's selling agent,she learned that the parent company expects royalties of 5%.These are:
A)The initial investment,also known as the franchise fee paid to the franchisor.
B)The cost of supplies that she will purchase one time each month from the parent company.
C)Milestones that the parent company expects her to reach.With each milestone,she will be rewarded with commissions.
D)A share of the profits or a percentage share of revenues net sales).

Accepted Answer

Royalties are a percentage share of revenues or profits that the franchisee pays to the franchisor. Therefore, option D is the correct choice. The other options do not relate to royalties.

Question 17

In a cooperative,members/customers:
A)Democratically control their businesses by electing a board of directors.
B)Are known as limited partners.
C)Each have unlimited liability for the debts of the firm.
D)Take turns serving on the board that manages the company.

Accepted Answer

Cooperatives are democratically controlled by their members/customers who elect a board of directors to manage the business on their behalf. This is a fundamental principle of cooperatives worldwide. Therefore, option A is the correct choice. The other options are incorrect as cooperatives do not have limited partners, each member has limited liability, and there is no rotation system for serving on the board.

Question 18

Daggie's Sandwiches,Inc. ,sells the rights to use its name and sell its sandwiches in a given market area to aspiring business people who are willing to pay agreed upon fees and meet certain contractual terms.Daggie's:
A)Is offering investors the opportunity to form limited partnerships.
B)Is a franchisor.
C)Creates private subsidiary companies.
D)Offers a tax-free investment potential.

Accepted Answer

Daggie's is using a franchising business model where entrepreneurs pay for the right to use the company's name and sell its products in a specific market area. This is not a limited partnership, the creation of subsidiaries, or a tax-free investment opportunity.

Question 19

Naomi is planning to invest in a new online franchise - the Novel Artist,Inc.The franchisor provides proprietary software and training for designing invitations and cards for special occasions such as weddings,graduations,and birth announcements.The franchisee is obligated to pay a monthly fee to the franchisor.Naomi will use the software to create her own special designs that she will ultimately feature on her website.She also has chat availability so she can accommodate customers with special requests.Order turn-around time must be fast.She can only take on as many clients as she can make good on delivery.An advantage of Naomi's online franchise is:
A)She has a limited territory.
B)She has a narrow product offering.
C)She does not need name recognition or marketing assistance.
D)She has an unlimited territory.

Accepted Answer

One advantage of Naomi's online franchise is that she has an unlimited territory. This means that she can potentially reach customers from all over the world, and is not limited to a specific region or area.

Question 20

A prospective franchise owner wants to keep his monthly costs at a minimum.The franchisor he is reviewing is advertising that royalty payments of 8% of sales could be as high as $250,000 per month.The franchisor is claiming that a franchisee can expect monthly sales to be as high as:
A)$2,125,000
B)$2,000,000
C)$3,125,000
D)$200,000

Accepted Answer

The answer of A prospective franchise owner wants to keep...

Quiz 5: How to Form a Business

In rural areas electrical power is often sold by ____________ that take advantage of the government's policy to sell them electricity at wholesale rates.

A distinguishing feature of a cooperative is that it:

Greg plans to open up three Hottie Pata`tee franchises in the greater Denver are A.He just informed you that he plans to negotiate with the franchisor to eliminate the Big Potato Head that graces the roof of these restaurants.Greg is likely to learn that:

Some __________ ask members/customers to work at the organization for a number of hours a month as part of their duties.

The purpose of a farm cooperative is to:

Which of the following people would be most interested in participating in a business organized as a cooperative?

In the Thinking Green box titled,"Play Ball but Play Green",The Washington Nationals baseball team is featured as a franchised business that demonstrates environmental stewardship by:

Marco is a franchisee with Daggies,a chain of sandwich shops.His business was doing well until several Daggies franchisees got in trouble and were forced to close their shops.Soon afterward,Marco's business deteriorated and he too was forced to close.This is an example of:

Which of the following statements about farm cooperatives is most accurate? Farm cooperatives have:

A ___________ is an organization that is owned and controlled by the people who use it-producers,consumers and workers with similar needs pool their resources for mutual gain.

Midas Muffler sells franchises to prospective businesspersons who want to use the Midas name and offer Midas products.In a franchise arrangement,Midas would be the ,and the buyer of the franchise is the .

Which of the following statements about operating a U.S.-based franchise in a foreign country is most accurate?

People who form cooperatives:

Jenna plans to invest in a cleaning service franchise called "Spare Time".At her first interview with the franchisor's selling agent,she learned that the parent company expects royalties of 5%.These are:

In a cooperative,members/customers:

Daggie's Sandwiches,Inc. ,sells the rights to use its name and sell its sandwiches in a given market area to aspiring business people who are willing to pay agreed upon fees and meet certain contractual terms.Daggie's:

A prospective franchise owner wants to keep his monthly costs at a minimum.The franchisor he is reviewing is advertising that royalty payments of 8% of sales could be as high as $250,000 per month.The franchisor is claiming that a franchisee can expect monthly sales to be as high as: