Question 1

What is a difference between high technology businesses and other small businesses?

Accepted Answer

High technology businesses require greater capital and have higher initial startup costs than other small businesses. Nonetheless, many of the biggest started out in garages, basements, kitchens, and dorm rooms.

Question 2

Menami and Michael recently had their first child. As two working parents, they struggled to find good, economical childcare. As a result, they developed their own software to link parents with licensed, reasonably priced childcare providers. This is an example of the

Accepted Answer

This is an example of the sharing economy, or gig economy, which uses technology to connect consumers with the service providers they need. In this scenario, Menami and Michael develop software to connect parents with licensed, fairly priced childcare providers.

Question 3

Bob and Tom live and work in Texas, but they love vacationing in the Bahamas. After several years, they decide to buy a vacation home in the Bahamas. When they are not there, they rent the property to other people for $1,200 per week. This is an example of

Accepted Answer

This is an example of the sharing economy, an economic model involving the sharing of underutilized resources. Under this model, entrepreneurs can earn income by renting out an underutilized resource such as lodging or vehicles.

Question 4

A challenge associated with the sharing economy is

Accepted Answer

In the sharing economy, companies can control variables such as rates, and they hire independent contractors who have the flexibility to take on work when it is convenient for them. Services offered through this model often cost less than more traditional services, and it is even taking market share away from established firms. Despite the opportunities in the sharing economy, firms have been experiencing pressure over whether workers are independent contractors or employees.

Question 5

As an advantage of being a small business owner, independence means

Accepted Answer

Independence is probably one of the leading reasons that entrepreneurs choose to go into business for themselves. Being a small-business owner means being your own boss. Many people start their own businesses because they believe they will do better for themselves than they could do by remaining with their current employer or by changing jobs.

Question 6

Seamus has worked for a large corporation for years, and he feels like he just does not fit in the "corporate mold" anymore. He decides to start his own business because he wants the freedom to choose with whom he works and when and where he works. What advantage of small business ownership seems the most prevalent in this example?

Accepted Answer

Independence is the most prevalent advantage of a small business in this example. Often, small business owners want the freedom to choose whom they work with, the flexibility to pick where and when to work, and the option of working in a family setting. Many people choose to start their own business because they don't fit in the "corporate mold."

Question 7

A small businesses wanting to minimize its operating costs might do all of the following EXCEPT

Accepted Answer

Small businesses require less money to start and maintain than larger ones. A firm with less employees and a smaller factory spends less money on wages and salaries, rent, utilities, and other expenses. Rather than maintaining the expense of keeping separate departments for accounting, advertising, and legal counseling, small businesses can hire other firms to supply these services as needed. Additionally, small business owners can sometimes rely on friends and family to help with difficult projects.

Question 8

Which description is the BEST example of a market niche?

Accepted Answer

A firm focusing its efforts on elderly people, residing in assisted living centers who suffer from macular degeneration, is an example of a market niche-that is, a specific group of customers. Potential customers wanting to buy a new vehicle or wanting to take a cruise are not market niches because the customer bases are too broad. By targeting small niches or product needs, businesses can sometimes avoid competition from larger firms, helping them to grow into stronger companies.

Question 9

What is true regarding the reputation of small businesses?

Accepted Answer

Since small firms have the capacity to focus on narrow niches, they can develop enviable reputations for quality and service.

Question 10

Mark owns his own small bakery. In addition to being the owner, he also serves as the manager, sales force, head baker, shipping and receiving clerk, bookkeeper, and custodian. Mark is the first person to arrive at the bakery every morning and the last to leave every night. What is the most applicable challenge Mark faces?

Accepted Answer

In this scenario, Mark has to multitask, which can result in long hours and a high stress level. Many creative persons fail, not because of their business concepts, but rather because of difficulties in managing their business.

Question 11

Oliver came up with the idea of producing mayonnaise in neon colors. He was sure that kids would love the idea and this would become the hottest product on the market. Unfortunately, the neon-colored mayonnaise wasn't such a hit. What is the most likely cause of Oliver's product failure?

Accepted Answer

A poor business concept will produce disaster for a small business nearly every time. Other notable causes of small-business failure include the burdens imposed by government regulation, insufficient funds to withstand slow sales, vulnerability to competition from larger companies, undercapitalization, managerial inexperience or incompetence, and inability to cope with growth.

Question 12

A business that lacks funds to operate normally faces a problem known as

Accepted Answer

The shortest path to failure in business is undercapitalization, which is the lack of funds to operate a business normally.

Question 13

Kaden and Elizabeth run a small farm stand on their property, selling vegetables, fruits, and plants to support themselves. During a particularly bad growing season, they try to get financing from a small rural bank in their community but they do not get it. What is the most likely reason for this?

Accepted Answer

Many small rural operations, like this one, cannot obtain financing within their own communities because small rural banks often lack the necessary financing expertise or assets sizable enough to counter the risks involved with small-business loans.

Question 14

Elaine has a great idea for starting a new business, but she is not sure if she has the knowledge or experience to run a growing business effectively. This relates to which cause of small business failure?

Accepted Answer

Although Elaine has a great idea for a small business, that does not mean she has the knowledge or experience to manage a growing business effectively. Often, a person who is good at creating great product ideas and marketing them may lack the skills and experience to make good management decisions in hiring, negotiating, finance, and control.

Question 15

Why do some small businesses choose to stay small and are not interested in wide-scale growth?

Accepted Answer

The principal immediate threats to small and mid-sized businesses include rising inflation, energy and other supply shortages or cost escalations, and excessive household and/or corporate debt. For this reason, some small-business owners choose to stay small and are not interested in wide-scale growth.

Question 16

It has often been said that the greatest impediment to the success of a small business is

Accepted Answer

It has often been said that the greatest impediment to the success of a small business is the entrepreneur.

Question 17

Manuel wants to start his own small business. All of the following are things he must to do to start a business EXCEPT

Accepted Answer

To start any business, large or small, Manuel must have some kind of general idea. Next, he needs to devise a strategy to guide planning and development in the business. Finally, he must make decisions about the form of ownership; the financial resources needed; and whether to acquire an existing business, start a new one, or buy a franchise.

Question 18

Brenda is starting her own small home decorating company. She is developing the company's business plan. What is something the business plan should accomplish?

Accepted Answer

A business plan should act as a guide and reference document, not a shackle to limit the business's flexibility and decision-making ability. The business plan should include an explanation of the business, an analysis of the competition, estimates of income and expenses, and other information. The business plan must be revised periodically to ensure that the firm's goals and strategies adapt to changes in the environment.

Question 19

In the process of starting a business, along with developing a business plan, the entrepreneur needs to

Accepted Answer

After developing a business plan, the entrepreneur next must decide on an appropriate legal form of business ownership-whether it is best to operate as a sole proprietorship, partnership, or corporation-and to examine the many factors that affect that decision.

Question 20

Jayla wants to open her own business making cakes. She has $10,000 of her own money and receives another $20,000 from family and friends. This combined $30,000 that Jayla can use toward her new business is referred to as

Accepted Answer

The expression "it takes money to make money"
holds especially true in developing a business enterprise. To make money from a small business, the owner must first provide or obtain money-otherwise known as capital.

Quiz 5: Small Business, Entrepreneurship, and Franchising