Question 1

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 where members also act as owners, and as a result, they are often required to contribute to the organization's operations by working at the organization for a set number of hours per month.

Question 2

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 a franchisor, meaning they are granting the rights to use their name and sell their sandwiches to franchisees in exchange for fees and contractual terms. This is a common business model for expanding a brand and reaching new markets. The other choices do not accurately describe the situation.

Question 3

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 company selling the franchise (in this case, Midas Mufflers) is the franchisor, while the person buying the franchise is the franchisee. Therefore, the best choice is C.

Question 4

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 typically a percentage of net sales or profits that are paid to the franchisor by the franchisee. This option is the only one that represents a share of the profits or a percentage share of revenues, and therefore the most likely choice for what the franchisor expects as royalties. Options A and B involve specific costs or fees paid to the franchisor that are not directly linked to ongoing profits or revenue. Option C involves commissions, which are not the same as royalties.

Question 5

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

The definition given describes a cooperative, where the members are also the owners and decision-makers of the organization. A corporation is owned by shareholders, a limited partnership has both general and limited partners with different roles and responsibilities, and a mutual fund is a type of investment vehicle that pools money from multiple investors to invest in securities.

Question 6

What is the difference between a general partner and a limited partner? Give an example of a situation in which a person would want to be a limited partner.

Accepted Answer

The answer of What is the difference between a general...

Question 7

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 that a franchisor's actions can have on its franchisees. In this case, the troubles faced by other Daggies franchisees had a negative impact on Marco's business, leading to its eventual closure.

Question 8

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

A farm cooperative allows farmers to pool resources and gain more economic power as a group than they would have as individuals. This allows them to negotiate better prices for their products, access to credit, and shared resources such as equipment and marketing. The goal is to increase the profitability and sustainability of each member farm. B, C, and D are not the primary purposes of a farm cooperative.

Question 9

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

Becoming a franchise owner typically involves paying high initial costs and fees, such as a franchise fee, equipment costs, and ongoing royalties to the franchisor. This can be a significant financial burden for new franchisees. Poor name recognition and visibility (B), lack of financing (C), and lack of managerial assistance (D) may also be potential problems, but they are not as common as high initial costs and fees.

Question 10

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

In a cooperative, the members/customers democratically control their businesses by electing a board of directors. This is one of the defining characteristics of a cooperative, where each member has an equal say in the decision-making process regardless of their level of contribution to the organization. Therefore, choice A is the correct answer. B and C are incorrect as they do not accurately describe the structure or liability of a cooperative. D may be true in some cases, but it is not a defining characteristic of cooperatives.

Question 11

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 a(n):
A) Closed corporation.
B) Joint venture.
C) Limited agricultural partnership.
D) Farm cooperative.

Accepted Answer

The arrangement established by these vineyard owners is an example of a farm cooperative, where small farmers band together to market their products and increase their bargaining power to compete with larger farms.

Question 12

Although most new firms start out as sole proprietorships,few large firms are organized this way.Why is the sole proprietorship such a popular form of ownership for new firms? What features of the sole proprietorship make it unattractive to growing firms?

Accepted Answer

The answer of Although most new firms start out as...

Question 13

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 purchase electricity at wholesale rates and distribute it to members at a lower cost. This allows for greater access to electricity in areas where it may be difficult or costly to provide.

Question 14

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

Naomi has an unlimited territory because her franchise is an online business and she can cater to customers from anywhere in the world.

Question 15

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 and operated by the people who use it, making it a democratic organization. The main purpose of a cooperative is to meet the needs of its members, rather than to generate profits for outside shareholders. Therefore, its ownership and management are intertwined and collaborative in nature. Option A is incorrect because cooperatives typically have a close link between ownership and management, often involving members elected to serve on the board of directors. Option B is incorrect because cooperatives can operate indefinitely, with many existing today that were established over a century ago. Option D is incorrect because there is no legal limit to the number of owners in a cooperative, although some states impose limits under their cooperative corporation laws.

Question 16

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

We can use the formula:

Monthly sales = Royalty payments / Royalty rate

To find the maximum monthly sales the franchisee can expect based on the given information.

Plugging in the numbers:

Monthly sales = $250,000 / 8% = $3,125,000

Therefore, the franchisee can expect monthly sales to be as high as $3,125,000, which is best represented by choice C.

Question 17

Greg plans to open up three Hottie Pata′tee franchises in the greater Denver area.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 Big Potato Head is likely a trademarked image and part of the franchisor's brand identity. Franchisees typically have to follow strict guidelines set by the franchisor in order to maintain consistency across all locations and uphold the brand's image. It is unlikely that the franchisor will negotiate to eliminate a key aspect of its brand identity.

Question 18

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, providing farmers with the collective bargaining power to sell their products and purchase inputs such as feed, seed, and fertilizer at lower costs. While some smaller cooperatives have merged or consolidated in recent years, the overall number and size of cooperatives has remained relatively stable. There have been some legal disputes involving cooperatives and antitrust laws, but these have been few and far between.

Question 19

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 the principle of cooperation and mutual assistance. They prefer to have a collective ownership and control of the business, where owners, managers, and customers work together towards common goals. This is in contrast to traditional business models, where owners seek to maximize profit, managers aim to achieve efficiency, and customers look for the best value for their money. Cooperatives emphasize the social benefits of their activities over individual gain, making them a popular choice for those who wish to promote community development and economic equality.

Question 20

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

A cooperative is a business owned and operated by a group of individuals for their mutual benefit. Joe is interested in combining resources with others to operate such a business, indicating that he would be most interested in participating in a cooperative. Joan, Jeff, and Jennifer do not necessarily express an interest in a cooperative business model.

Quiz 5: How to Form a Business

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

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:

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 _.

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 ___________ 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.

What is the difference between a general partner and a limited partner? Give an example of a situation in which a person would want to be a limited partner.

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:

The purpose of a farm cooperative is to:

In a cooperative,members/customers:

Although most new firms start out as sole proprietorships,few large firms are organized this way.Why is the sole proprietorship such a popular form of ownership for new firms? What features of the sole proprietorship make it unattractive to growing firms?

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:

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:

Greg plans to open up three Hottie Pata′tee franchises in the greater Denver area.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:

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

People who form cooperatives:

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