2000 Entrepreneurship                                                               Page 1

1. Telemarketing and selling on the Internet are both          a. True   b. False
examples of direct marketing.
2. Business-to-business salespeople sell to wholesalers,       a. True   b. False
retailers, and manufacturers.
3. An advantage of an S Corporation over a                     a. True   b. False
conventional corporation is that the profits of the business
are taxed as regular personal income of the owners, thus
avoiding the problem of double taxation.
4. In a merger, two firms combine to form one company.         a. True   b. False
5. Today, franchising accounts for about 40 percent of         a. True   b. False
the national retail sales in the United States.
6. The franchisee often must pay the franchiser a share        a. True   b. False
of profits or a percentage commission on sales known as a
7. Although entrepreneurs frequently earn huge profits         a. True   b. False
for themselves, their impact on society as a whole is quite
8. American history illustrates many cases in which            a. True   b. False
entrepreneurs started small businesses that grew into major
corporations employing thousands of workers.
9. In general, entrepreneurs are more interested in            a. True   b. False
personal achievement than in power.
10. To encourage more entrepreneurs in the United              a. True   b. False
States, the government passed the Immigration Act of
11. To be classified as a small business, a firm must have     a. True   b. False
fewer than 100 employees.
12. Sharon decided to work for a floral design shop            a. True   b. False
before opening her own shop. This was a poor decision
because she used her labor to make someone else
13. Because it is written before the business even begins      a. True   b. False
to operate, a business plan by its very nature is vague.
14. Venture capitalists can be excellent sources of capital    a. True   b. False
for small business since they provide financing in
exchange for a very small stake in the company.
15. ISO 9000 refers to a set of international standards for    a. True   b. False
quality management and assurance.
16. The total value of a country's output in a given year      a. True   b. False
is known as the nation's gross domestic product (GDP).
17. Efforts by the Federal Reserve System to control the       a. True   b. False
money supply and interest rates are known as monetary
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18. A patent gives inventors exclusive rights to their        a. True                        b. False
inventions for 20 years.
19. The intent of the Sherman Antitrust Act of 1890 was       a. True                        b. False
to encourage the growth of large business organizations in
the U.S. in order to compete with more established firms in
20. Theory Y assumes that all workers are motivated           a. True                        b. False
more by money than any other factor.
21. A basic difference between businesses and                 a. seek to earn a profit.      b. produce tangible goods      c. have a limited life.      d. must have a board of
organizations such as charities and government agencies is                                   rather than providing                                       directors.
that businesses                                                                              services.
22. Entrepreneurs are characterized mainly by their           a. willingness to accept       b. high level of scientific    c. personal wealth.          d. experience in running
                                                              the risks involved in          and technical expertise.                                    large, complex
                                                              starting and managing a                                                                    organizations.
23. In the United States, the level of taxes and              a. influences where            b. is the same in all areas    c. seems to have no effect   d. is so high that the
government regulations                                        entrepreneurs locate           of the country.                on the creation of wealth.   American economy is now
                                                              their businesses.                                                                          classified as pure
24. The population of the United States is diverse,           a. multiculturalism.           b. ethnocentrism.              c. macrocentrism.            d. social Darwinism.
including people from many different racial and ethnic
groups. Optimizing the contributions of these various
cultural groups is known as
25. Which of the statements about demography is most          a. are important for the       b. suggest that the number     c. provide business and      d. are an important source
accurate. Demographic studies                                 government, but not for        of two-income families         individuals key insights     of information about
                                                              private businesses.            will decline in the future.    into business and career     weather and climate.
                                                                                                                            opportunities of the
26. The agreement between the United States, Canada,          a. NAFTA.                      b. OPEC.                       c. NATO.                     d. the Trilateral
and Mexico to remove barriers that restricted trade among                                                                                                Agreement.
these nations is known as
27. Given the current state of global competition,            a. U.S. firms that produce     b. consumers now expect        c. the U.S. government       d. U.S. firms should be
                                                              quality products are able to   high quality products          must subsidize American      able to dominate most
                                                              charge premium prices for      and good service at low        farmers and                  foreign markets because
                                                              their products.                prices.                        manufacturers, as well as    the U.S. is the only nation
                                                                                                                            foreign producers, if they   where high quality is
                                                                                                                            are to survive.              achieved in most
28.   Under capitalism                                        a. most of the means of        b. distribution of wealth is   c. utilities, health care,   d. the market can only
                                                              production and                 the primary function of        education, and other         operate within a system of
                                                              distribution are privately     government.                    services are totally         strict regulations and
                                                              owned and operated for                                        controlled by the state.     central planning.
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29. The quantity of a good or service that manufacturers        a. supply of that product.   b. demand for that product.   c. equilibrium function for     d. production possibilities
or owners are willing to sell at different prices during a                                                                 that product.                   curve for that product.
specific time period is known as the
30. A typical demand curve suggests that                        a. as people earn more       b. as supply increases, the   c. people tend to buy           d. people tend to buy more
                                                                income, they buy more of     amount purchased              more of a good as its           of a good than they really
                                                                a good.                      decreases.                    price decreases.                need.
31. One advertising strategy used by McDonald's is to           a. product                   b. an equilibrium price.      c. a perfectly competitive      d. quantity supplied that is
convince potential buyers that their products are different     differentiation.                                           market.                         greater than the quantity
from those of their competitors. The goal of this strategy is                                                                                              demanded.
to achieve
32. The primary objective of monetary policy is to              a. help the federal          b. keep interest rates low.   c. keep the value of the        d. keep the economy
                                                                government finance its                                     dollar high in international    growing without causing
                                                                deficit.                                                   currency markets.               inflation.
33. Which theory states that a nation should produce and        a. Comparative               b. Absolute advantage         c. Factor advantage             d. Bilateral advantage
sell goods that it produces most efficiently to other           advantage
countries, and buy goods produced more efficiently by
other countries?
34. The president of the American Auto Parts                    a. dumping.                  b. reverse exporting.         c. free trade.                  d. bilateral trade surplus.
Corporation recently testified before members of
Congress, urging them to limit the flow of imported
automobile parts into the United States. She contended that
these imports were priced lower than the foreign producers
were charging in their own countries. She believes these
foreign producers are guilty of
35. Pepsi Cola has entered into a long-term contract with       a. licensing.                b. a joint venture.           c. a foreign subsidiary.        d. countertrading.
a South African beverage business. The contract calls for
the South African firm to produce and market Pepsi Cola
in South Africa. Pepsi will receive a royalty on each case
of soda sold. This is an example of
36. U.S. business people have been described as having          a. feel that they cannot     b. are very open to new       c. believe our culture is       d. take pride in the many
ethnocentric views in their dealings with other countries.      compete in foreign           ideas.                        superior to all others.         ethnic groups that make
This means that American business people                        countries without behaving                                                                 America a "melting pot."
37. Kwantum Computers attempts, where possible, to              a. international             b. global marketing.          c. multinational selling.       d. countertrading.
communicate the same promotional message about their            foolishness.
product everywhere in the world their product is sold. This
is an example of
38. The U.S. government has announced a 5 million-              a. embargo.                  b. revenue tariff.            c. import quota.                d. export cap.
pound annual limit on beef imported from the country of
Argentina. This type of trade restriction is called a/an
39. A major concern voiced by U.S. critics of the North         a. higher prices for         b. loss of jobs in the U.S.   c. loss of national identity.   d. a trade war between the
American Free Trade Agreement (NAFTA) is that it would          consumer goods.              economy.                                                      United States and Mexico.
result in
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40. Adam's Apple Corporation ships all of the apples            a. is a clear example of a   b. is not a multinational     c. is contributing to the    d. will benefit greatly from
from its orchards in Washington to a single buyer in Japan.     multinational corporation.   corporation.                  U.S. balance of trade        the establishment of
The firm's entire profits are derived from this international                                                              deficit.                     NAFTA.
transaction. Adam's Apple Corporation
41. Obeying the law is ______ ethical behavior.                 a. the same as               b. the first step towards     c. the opposite of           d. the last step towards
42. Considering the impact on other involved individuals        a. legal                     b. anti-social                c. ethical                   d. self-motivated
before making decisions is consistent with _______
43. Attempting to misrepresent your firm's income when          a. a good business           b. tax accountants at their   c. illegal behavior.         d. profit maximization.
calculating your tax liability is an example of                 practice.                    best.
44. The most basic step in an ethics-based management           a. "Is it legal?"            b. "Is it balanced?"          c. "How will it make me      d. "Is it ethical?"
system is the question                                                                                                     feel about myself?"
45. All of the following would be considered ethical            a. overstating an expense    b. forecasting sales for      c. withholding product       d. ignoring unsafe working
matters in a business, except                                   report.                      the next year.                safety information.          conditions.
46. Which of the following describes charitable donations       a. Corporate                 b. Corporate responsibility   c. Corporate policy          d. Corporate structure and
by corporations to nonprofit organizations?                     philanthropy                                                                            function
47. The position a firm takes on issues that affect the         a. corporate philanthropy.   b. corporate policy.          c. corporate ethnicity.      d. corporate philosophy.
corporation as well as society is known as its
48. _______ encompasses various issues such as setting          a. Corporate                 b. Corporate philanthropy     c. Corporate ethnocentrism   d. Corporate structure and
minority hiring practices, manufacturing safe products, and     responsibility                                                                          function
minimizing pollution.
49. People who can affect or are affected by the                a. lienholders.              b. stockholders.              c. stakeholders.             d. leaseholders.
achievement of an organization's objectives are referred to
50. ______ refers to rules, statutes, codes, and                a. Common law                b. Statutory law              c. Bankruptcy law            d. Business law
regulations established to provide a legal framework
within which business may be conducted.
51. The body of law created by court decisions rendered         a. business                  b. statutory                  c. common                    d. tort
by judges is called ______ law.
52. A patent gives inventors exclusive rights to their          a. 20 months.                b. 17 years.                  c. 20 years.                 d. the lifetime of the
inventions for                                                                                                                                          inventor plus 50 years.
53. The NBC peacock and the Golden Arches of                    a. trademark                 b. submarine patent           c. copyright                 d. copy protection
McDonald's are examples of a _______.
54. A set of laws designed to eliminate differences             a. common law.               b. statutory law.             c. standardized              d. the uniform
among state regulations affecting business and to simplify                                                                 comprehensive rules.         commercial code.
interstate commerce is called
55. The warranty you receive in the box with a new              a. implied warranty.         b. express warranty.          c. uniform warranty.         d. commercial warranty.
toaster or VCR is a/an
56. Which of the following prohibited monopolies'               a. Clayton Act               b. Sherman Act                c. Robinson-Patman Act       d. Wheeler-Lea
attempts to monopolize, or restrain any part of trade or                                                                                                Amendment
57. The social movement designed to increase and                a. environmentalism.         b. capitalism.                c. socialism.                d. consumerism.
strengthen the rights and powers of buyers in business
transactions is called
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58. The legal process by which an individual is relieved      a. financial discharge.         b. bankruptcy.                c. debtor relief.              d. creditor discharge.
of his or her financial obligations by a court of law is
59. Johnson Products charges larger firms a lower price       a. discrimination.              b. reversal.                  c. cutting.                    d. maintenance.
for goods than it charges small firms. This practice is
called price
60. In the United States today, the most common form of       a. partnership.                 b. corporation.               c. joint venture               d. sole proprietorship.
business ownership is the
61. A business organization that is owned, and usually        a. closed corporation.          b. subchapter S               c. sole proprietorship.        d. limited partnership.
managed, by one person is a                                                                   corporation.
62. All of the following are considered advantages of         a. ease of starting and         b. retention of profits.      c. no special taxes.           d. limited liability.
being a sole proprietorship except                            ending the business.
63. One of the primary disadvantages of owning a sole         a. possibility of limited       b. heavy tax liability that   c. often overwhelming          d. None of the above
proprietorship is the                                         liability.                      must be assumed.              time commitment
                                                                                                                            required of the owner.
64. Any debts or damages incurred by a firm organized         a. the sole responsibility      b. limited to the amount      c. paid for out of a reserve   d. normally covered by
as a sole proprietorship are                                  of the owner.                   the owner has invested in     contingency fund that sole     liability insurance.
                                                                                              the firm.                     proprietors are required by
                                                                                                                            law to set up.
65. Eiroy Hatchard is the sole proprietor of a gift shop in   a. totally tax-free.            b. taxed only once, as        c. taxed twice, once as        d. taxed only if and when
a small shopping center. Because he is a sole proprietor,                                     Eiroy's personal income.      business income, then          it is distributed to
Eiroy's profit from the business is                                                                                         again as Eiroy's personal      investors.
66. A partner who invests money in a business, but who        a. implied partner.             b. limited partner.           c. partial partner.            d. corporate partner.
does NOT take an active role in management or assume
liability for the firm's losses is known as a/an
67. When entering into a new partnership, the partners        a. avoid putting their          b. put the partnership        c. plan to incorporate as      d. agree to put the first
should                                                        agreement in writing since      agreement in writing.         soon as possible.              year's profits back into the
                                                              this would limit the                                                                         partnership.
                                                              flexibility of the
68. When comparing partnerships to sole proprietorships,      a. are less risky, because      b. are easier to terminate.   c. cost less to organize.      d. give the firm a
an advantage of partnerships is that they                     each partner is responsible                                                                  stronger financial
                                                              for only a specified                                                                         foundation.
                                                              fraction of the firm's debts.
69. Which of the following is an advantage of the             a. Ease of formation            b. Lower taxes                c. Simplified paperwork        d. Limited liability of
corporate form of business when compared to sole                                                                                                           owners
proprietorships and partnerships?
70. Marie Lively recently invested $4,000 that her aunt       a. owner                        b. manager                    c. creditor                    d. partner
had left her in stock in the McBun Development
Corporation. Marie has become a/an _______ of McBun
71. The result of two firms forming one company is            a. joint tenancy.               b. tenancy in common.         c. merger.                     d. voluntary directorship.
called a
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72. When one company buys the property and                    a. cooperative.               b. hostile takeover.          c. leveraged buyout.          d. acquisition.
obligations of another company, the purchase is known as
73. A/An _______ is an arrangement whereby someone            a. conditional grant          b. franchise agreement        c. trade contract             d. extended ownership
with a good idea for a business sells the rights to use the                                                                                             agreement
business name and sell a product or service to others in a
given territory.
74. A _______ is the share of profits or percentage of        a. royalty                    b. dividend                   c. premium                    d. co-pay
sales a franchisee pays to a franchiser.
75. An entrepreneur is someone who                            a. manages a business for     b. owns controlling           c. manages a businesses       d. accepts the risk of
                                                              someone else.                 interest in the stock of a    that operates in more than    starting and running a
                                                                                            major corporation.            one country.                  business.
76. All of the following are characteristics of successful    a. self-directed.             b. tolerant of uncertainty.   c. willingness to accept      d. action-oriented.
entrepreneurs except                                                                                                      failure.
77. One feature of the Immigration Act of 1990 was the        a. creation of "investor      b. establishment of a         c. establishment of           d. exchange program that
                                                              visas" to attract more        government program to         guidelines to help            allows American
                                                              immigrants with               teach American workers        entrepreneurs recruit legal   entrepreneurs to live in
                                                              entrepreneurial ability.      displaced by immigration      aliens as a source of low     Europe temporarily in
                                                                                            how to start their own        cost labor.                   order to open up foreign
                                                                                            businesses.                                                 branches for their
78. Enterprise zones are areas which                          a. the government has set     b. feature low taxes and      c. the government has         d. are characterized by
                                                              aside for use by major        government support in         recognized as having the      government ownership of
                                                              corporations that promise     an effort to encourage        fastest growth rates in the   small businesses.
                                                              to spend at least $10         entrepreneurship.             country.
                                                              million to create new jobs.
79. A creative person who works within a corporation to       a. arbitrator.                b. arbitrageur.               c. extrapolator.              d. intrapreneur.
develop new products and generate new profits is known
as a/an
80. A look at the history of the United States suggests       a. often have created great   b. have started many          c. have been successful       d. played an important role
that entrepreneurs                                            personal wealth for           small firms that later        only when they worked in      in the U.S. when the
                                                              themselves, but have had a    became major                  partnership with the          economy was small but are
                                                              minor impact on the U.S.      corporations employing        federal government.           less important now that the
                                                              economy as a whole.           thousands of workers.                                       U.S. is the world's
                                                                                                                                                        dominant economic
81. Which of the following elements are generally found       a. Creative, marketing,       b. Venture financing, tax     c. Scientific abilities,      d. Reliance on risk, debt
to be a part of entrepreneurial teams?                        and production skills         benefits, and production      capital investment, and       financing, and
                                                                                            economies                     marketing skill               international experience
82. A detailed written statement that describes the nature    a. business plan.             b. ratio analysis.            c. profit and loss            d. professional plan.
of the business, the target market, the advantages the                                                                    statement.
business will have in relation to competition, and the
resources and qualifications of the owner is referred to as
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83. Other than personal savings, the largest source of        a. large banks.             b. the Small Business        c. state governments.        d. individual investors.
capital to entrepreneurs comes from                                                       Administration.
84. A participation loan from the SBA is a                    a. low cost loan that is    b. combination of a          c. low interest loan made    d. loan made to a firm in
                                                              only made to                direct loan from the SBA     to firms that agree to       financial difficulty with
                                                              entrepreneurs who have      and a loan guarantee         participate in a minority    the provision that a
                                                              participated in the SBA's   from a financial             hiring program.              manager appointed by the
                                                              training programs.          institution.                                              SBA consultant can
                                                                                                                                                    participate in the firm's
                                                                                                                                                    management until the
                                                                                                                                                    financial performance
85. When preparing the executive summary section of a         a. computer software        b. it must grab the          c. you should list all the   d. a perfect business plan
business plan, it is important to remember that               programs will provide you   attention of bankers who     qualifications and           starts in this section.
                                                              with the information        receive many business        education of the executive
                                                              needed to complete this     plans every day.             entrepreneur.
86. _______ is the process used to accomplish                 a. Socialization            b. Justification             c. Preparation               d. Management
organizational goals through planning, organizing, leading,
and controlling people and other resources.
87. Which of the following activities is part of the          a. Assigning a particular   b. Looking at market         c. Talking to an employee    d. Conducting a job
planning function of a manager?                               worker to do a specific     forecasts to identify        whose job performance        interview with a potential
                                                              task.                       future business              has been unsatisfactory.     new employee.
                                                                                          opportunities and
88. A _______ is an overall explanation of why an             a. tactical plan            b. prime directive           c. corporate charter         d. vision
organization exists and where it is trying to head.
89. Employees often work with managers to design a/an         a. objective function       b. priority hierarchy        c. mission statement         d. corporate blue book
_______ which outlines the fundamental purposes of the
90. Douglas McGregor described two very different             a. the positive view and    b. the macro perspective     c. Theory X and Theory       d. individualism and
managerial attitudes about workers, which he called           the negative view.          and the micro perspective.   Y.                           collectivism.
91. Theory ______ sees workers as being lazy and              a. A                        b. X                         c. Y                         d. Z
unwilling to accept responsibility.
92. An attempt by marketers to persuade consumers to          a. promotion.               b. market research.          c. unilateral sales.         d. benefit segmentation.
participate in an exchange is called
93. An event where many marketers set up displays to be       a. promotional event.       b. direct marketing show.    c. public relations event.   d. trade show.
seen by potential customers is called a
94. The most important internal sales promotion efforts       a. customers.               b. salespeople.              c. virtual trade shows.      d. accountants.
are directed at
95. The most selective advertising medium for reaching        a. radio.                   b. newspapers.               c. television.               d. direct mail.
a specific target market is
96. All of the following are components of an                 a. public relations.        b. sales promotions.         c. personal selling.         d. company trademarks.
organization's promotional mix except
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97. The technology revolution has                      a. not really affected   b. not had as much impact     c. put more control in the    d. empowered customers
                                                       advertising.             on advertising as it has on   hands of the                  with greater involvement
                                                                                other areas of business.      businessperson.               and control.
98. What are the "4 P's of Marketing"?                 a. Product, promotion,   b. Position, product,         c. Promotion, price, place,   d. Price, product,
                                                       place, position          promotion, price              position                      promotion, place
99. The letters GE in a circle is General Electric's   a. generic name.         b. label.                     c. trademark.                 d. brand.
100. Knockoff brands are _______ copies of national    a. exact                 b. clever                     c. illegal                    d. licensed
brand name goods.

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