Innovation and Entrepreneurship (Practice Exam 2)

The ability to exit a business relatively easily tends to increase the threat posed by a new entry.

True or False

False

James has invested a large amount of money in his business; he is reluctant to just give up this investment, which he would have to do if he closed his business. This is an example of an exit barrier.

True or False

False

To have a competitive advantage, the unusual products or services of a business need to meet these four criteria: rare, durable, valuable, and non-substitutable.

True or False

True

The ability to exit a business relatively easily

• encourages entrepreneurs to use predatory pricing in order to survive.

• makes it difficult for an entrepreneur to recoup the initial investment.

• increases the threat posed by a new entry.

• tends to limit the intensity of competition in the industry.

tends to limit the intensity of competition in the industry.

Resource-based analysis is ineffective because it fails to define a business's competitive advantages and differentiate these from their competitors.

True or False

False

Which of the following provides the new business with the opportunity to make more money than the competition?

• external analysis

• industry trends

• competitive advantage

• market trends

competitive advantage

According to the book, which of the following is an example of an economic issue that a new business should consider?

• ease of entry/exit

• elasticity of demand

• All of these choices are correct.

• industry trends

All of these choices are correct.

In an external analysis, the first step for a business is to determine the industry in which the business is expected to compete.

True or False

True

All of these are criteria to be an unusual or unique service/product except

• consistent.

• rare.

• valuable.

• durable.

consistent.

Defining a core customer base can help a new business keep a more focused inventory.

True or False

True

In the context of external analysis, once an entrepreneur has examined and developed insights about substitutes, elasticity of demand, ease of entry and exit, benchmarking, and industry trends, they should 

• develop an understanding of their competitive advantage.

• draw a set of competitive maps.

• define the industry in which they are competing.

• identify competitors within the defined industry.

develop an understanding of their competitive advantage.

____ is the edge a business has over competing businesses.

• Criteria-related advantage

• Competitive advantage

• Competitive map

• Benchmarking

Competitive advantage

When researching the industry of a potential business, hiring a consultant or agency ________ the insights that could be obtained.

• makes no difference to

• increases

• diverts

• limits

limits

Larry has set up a new burger joint in his hometown. He has obtained information about who will most likely be customers at his joint. Because his joint is located near a college, he knows that a majority of his customers are going to be students. In the context of the critical steps involved in conducting an external analysis, which of the following should be Larry's next step?

• Larry should conduct research to know his exact competitors.

• Larry should develop insights about benchmarking.

• Larry should gain thorough information about the elasticity of demand for his product.

• Larry should start developing an understanding of his competitive advantage.

Larry should conduct research to know his exact competitors.

Competitors will often ________ their knowledge if your business is not a potential direct competitor.

• distort

• not share

• hide

• share

share

Sara is planning to start an Internet business. In order to develop a competitive map, she is examining certain potential competitors. Which of the following features of the competitors' business is most likely to affect her business too?

• size of the facility

• product breadth

• access from road

• décor at the facility

product breadth

James is opening up a gourmet hamburger shop. To define his customer base, the first step is to draw a geographical radius around the proposed location.

True or False

True

If the expenses incurred in operating a business are such that an entrepreneur cannot easily recoup the investment, then the level of competition will be more intense.

True or False

True

Defining the firm's industry is something that can be taken lightly; the small business owner really needs to learn only about the local market. Industry information can be learned later.

True or False

False

A business owner will gain an increased understanding of the unusual or unique competitive factors and capabilities of a business through

• benchmarking.

• resource-based analysis

• gap analysis.

• competitive map.

resource-based analysis.

When completing a conceptual map, an entrepreneur needs to visit ________ of the potential competitors.

• 75 percent

• 60 percent

• 50 percent

• 100 percent

100 percent

The first part of an external analysis is to

• determine in which industry the new business will compete.

• develop a competitive edge.

• identify potential customers.

• research potential substitutes.

determine in which industry the new business will compete.

Which of the following should be an entrepreneur's last step in external analysis?

• identifying competitors within the industry

• defining the customers

• developing competitive maps

• understanding the competitive advantage

understanding the competitive advantage

Elasticity of demand is the ease with which a customer can switch to a substitute or stop using a product when its price rises.

True or False

True

A trade-in is a product that performs a similar function or achieves the same result as the original product.

True or False

False

The first step in defining your customer base is to draw a geographical radius around your location; inside this radius is where you will find the majority of your potential customers.

True or False

True

Which of the following products is likely to have an inelastic demand?

• a Rolex watch

• rounds of golf

• a luxury car

• cancer medicine

cancer medicine

Initech is a computer manufacturing company. Janice, a senior manager at Initech, is given the task of developing the company's after-sales services. Janice researches information about companies that have been pioneers in this domain. She learns that Massive Dynamic, a car manufacturing company, has the best after-sales service in the country. She gets in touch with senior managers in Massive Dynamic and learns about their in-house operational processes that enable them to be leaders in the industry. She introduces new policies in her company with the knowledge gained from Massive Dynamic to improve their after-sales service. This scenario exemplifies 

• elasticity of demand.

• benchmarking.

• convergence.

• bootstrap marketing.

benchmarking.

One way to obtain the NAICS (North American Industry Classification System) code is to locate a direct competitor and research it through Dun & Bradstreet, LexisNexis, etc.

True or False

True

According to the book, a clear understanding of the business's customers is important because it

• aids in keeping a strategic distance between itself and its competitors.

• helps in focusing on the core customers.

• provides a way to control expenses.

• All of these choices are correct.

All of these choices are correct.

Patents are inexpensive and easy to obtain and maintain.

True or False

False

A trademark is legal protection of intellectual property that is associated with a specific business.

True or False

True

Bonding is a type of insurance in which the business is covered in case the workers cause any damage in the performance of their work.

True or False

True

________ is a type of insurance in which a business is covered if the workers cause any damage to the performance of the work.

• Bonding

• Unlimited liability

• Workers' compensation

• Limited liability

Bonding

A business that chooses to form a corporation must have a board of directors. In new small corporations, the board of directors and shareholders must be different individuals.

True or False

False

Marsciva Technologies is an emerging business. The firm considers the owners to be employees of the firm and therefore pays them salaries and bonuses. To reduce corporate tax, the owners of Marsciva Technologies pay themselves nearly all the profits generated so that very little actual profits are reported by the firm. Based on these characteristics, Marsciva Technologies is most likely a(n)

• C Corporation.

• S Corporation.

• sole proprietorship.

• limited partnership.

C Corporation

The Small Business Assistance Center, run by the Small Business Administration, is an excellent source of information regarding

• which employees should be hired by a business.

• who should be on the board of advisors of a business.

• how a business must perform to gain maximum profit.

• rules and regulations with which a business must comply.

rules and regulations with which a business must comply.

A copyright is good for the life of the author plus 70 years.

True or False

True

All of the following are benefits of a C Corporation EXCEPT

• owners being treated as employees of the company.

• fringe benefits being treated as income.

• health benefits paid by the corporation.

• no limit to the number of shareholders.

fringe benefits being treated as income.

Which of the following is a benefit of an S Corporation over a C Corporation?

• An S Corporation has more potential for future expansion than a C Corporation.

• An S Corporation can have a larger number of investors than a C Corporation.

• An S Corporation pays for fringe benefits of the owners at its own expense unlike a C Corporation.

• An S Corporation has limitations in the number and type of shareholders unlike a C Corporation.

An S Corporation has limitations in the number and type of shareholders unlike a C Corporation.

A business can obtain liability insurance, which helps protect the business against lawsuit judgments.

True or False

True

In the context of legal forms of business, an S Corporation

• treats the owners of the firm as advisory members with little say in the operations of the firm.

• gives the owners of the firm virtually unlimited liability for its debts and liabilities.

• treats the owners of the firm and the firm itself as the same entity.

• allows the owners to treat the income of the firm as part of their personal incomes.

allows the owners to treat the income of the firm as part of their personal incomes.

Sea Waves Tours and Avis Travels enter into a formal agreement with each other. Under this agreement, over the next year, Sea Waves Tours will recommend Avis Travels to all its customers. Avis Travels will pay a small commission for every new customer they gain as a result of this recommendation. In this scenario, Sea Waves Tours and Avis Travels have

• created a C Corporation.

• entered into a general partnership.

• formed a limited liability partnership.

• signed a contract with each other.

signed a contract with each other.

In the context of legal forms of business, identify a true statement about limited liability partnership (LLP).

• All partners in a limited liability partnership are jointly responsible for any debts or judgments against the firm.

• General partners in a limited liability partnership are indirectly responsible for federal taxes owed by the firm.

• Limited partners in a limited liability partnership must be external advisors who do not have a stake in the ownership of the firm.

• In a limited liability partnership, limited partners can work at the firm but not be active in its management.

In a limited liability partnership, limited partners can work at the firm but not be active in its management.

Any business needs to acquire a license to do business in the county or city where the firm will be operating.

True or False

True

Any business needs to acquire a license to do business in the county or city where the firm will be operating.

True or False

False

A ________ is the simplest form of a business to establish, as the person who owns it and the business itself are treated as the same entity.

• limited liability corporation

• limited partnership

• C corporation

• sole proprietorship

sole proprietorship

Which of the following is the simplest form of business to establish?

• sole proprietorship

• C corporations

• limited liability partnership

• S corporations

sole proprietorship

The Americans with Disabilities Act (ADA) applies fully to any firm with more than 15 employees.

True or False

True

A difference between copyrights and patents is that copyrights apply to creative materials generated while patents cover specific innovations that are generally industrial or process-based.

True or False

True

The insurance coverage obtained by a small business is directly proportional to the cost. As the coverage increases, the cost also increases.

True or False

True

In the context of legal forms of business, a general partner in a limited liability partnership

• has unlimited liability for any debts or judgments against the firm.

• acts as an independent external advisor to the firm.

• is not active in the management of the firm.

• is not responsible for liabilities owed if the firm goes bankrupt.

has unlimited liability for any debts or judgments against the firm.

In the context of legal forms of business, identify a true statement about sole proprietorship firms.

• Many communities discourage the formation of these firms because their operations are difficult to regulate.

• Because of the limited nature of the growth potential of such firms, any profits they make are exempt from federal taxation.

• Laws governing business practices do not recognize other equity investors, which limits the growth potential of such firms.

• These firms can have multiple founders with equal stakes so long as a single individual is considered to be the owner.

Laws governing business practices do not recognize other equity investors, which limits the growth potential of such firms.

If a firm violates a trademark, it will be sued for damages but cannot be forced to change its name.

True or False

False

A patent is a claim of intellectual property that covers a specific innovation.

True or False

True

In the context of business licenses, a business is required to pay a business license tax that is determined by the number of employees it has.

True or False

False

It is illegal for sole proprietors to run their business by deducting business expenses from their business incomes.

True or False

False

When forming a sole proprietorship or a partnership, the business debts are

• paid the first day of the month.

• the responsibility of the owners.

• paid by purchase order.

• the responsibility of the firm's equity investors.

the responsibility of the owners.

A trademark cannot be renewed once it has been issued even when the firm or the product is active.

True or False

False

The Americans with Disabilities Act requires that there should be no discrimination in the hiring, management, or dismissal of employees with disabilities.

True or False

True

A contract must always be in written form, and it must be signed by the parties involved.

True or False

False

If a small business has employees, it must have an EIN (Employer Identification Number).

True or False

True

A ________ is a claim of intellectual property that is associated with a specific business.

• trademark

• copyright

• patent

• watermark

trademark

In a lease, a landlord can enter a business premises for all the following reasons except

• when the landlord wants to inspect it.

• when checking to see if anything is illegal.

• whenever the landlord wants to.

• when the landlord wants to manage the rental property.

whenever the landlord wants to.

Which of the following questions should a new business owner examine when considering leases?

• Who is responsible for maintenance and improvements?

• What exactly is the new business owner leasing?

• Is there an ability to renew the lease?

• All of these choices are correct.

All of these choices are correct.

In the context of business designs, one of the advantages of a corporation is that when it suffers losses, the founders will

• be expected to pool their personal finances to rescue the business.

• be absolved of responsibility for the debts of the company.

• lose only their investment in the business rather than their life's savings.

• surrender control of the company to investors.

lose only their investment in the business rather than their life's savings.

A business that chooses to form a corporation is legally required to have a

• board of directors.

• board of owners.

• board of advisors.

• board of employees.

board of directors.

A(n) ________Blank is an organizational form that treats a firm as a unique entity and is responsible for its own taxes.

• B Corporation

• X Corporation

• C Corporation

• A Corporation

C Corporation

A ________ is a claim of intellectual property that covers a specific invention.

• patent

• copyright

• watermark

• trademark

patent

An advantage of a sole proprietorship is that a business is very easy to form and dissolve because there is virtually no separation between the founder and the business.

True or False

True

A company can use personality testing, even though there is no direct link between the test and the skill set necessary for the job.

True or False

False

According to equity theory, employees are happy and satisfied when they feel that their compensation—given their performance—is equal to that of other employees in the firm or other individuals in similar situations.

True or False

True

________ is the quantity and quality of human effort directed toward producing goods and services

• Human skills

• Human resource management

• Human power

• Human knowledge

Human resource management

Which of the following statements is true of a performance review in an entrepreneurial business?

• A complex form should be followed for all performance reviews that are given in writing to assure its validity.

• The formal conversation with a worker who is doing a good job and acknowledging their work is a form of compensation.

• A new firm should wait for a year to give feedback, and newer generations of employees are looking for such feedback.

• If a worker is not performing as expected, then the employer should give only positive feedback to boost the worker's morale.

The formal conversation with a worker who is doing a good job and acknowledging their work is a form of compensation.

The screening of résumés or applications prior to beginning an interview process for a job and the checking of references is important.

True or False

True

The Americans with Disabilities Act regulates firms with how many employees?

• 15 or more employees

• Less than 10 employees

• 20 or more employees

• Less than 15 employees

15 or more employees

Unemployment compensation is the financial assistance for some period of time to those people who lose their jobs through no fault of their own.

True or False

True

Which of the following laws states an employer cannot discriminate in pay to men and women who do the same job?

• The Social Security Act

• The Affordable Care Act

• The Equal Pay Act

• The Americans with Disabilities Act

The Equal Pay Act

Which of the following is a document that describes a job that is to be filled?

• job description

• job analysis

• job design

• job plan

job description

Workers' compensation insurance rates are regulated by the federal government and are uniform across the country.

True or False

False

In an entrepreneurial business, a job description document is meant to be a formal, highly structured document as it might be in a large corporation.

True or False

False

Human resources has been defined in economics as the quantity and quality of human effort directed toward producing goods and services.

True or False

True

Human resource programs for small companies are the same and have the same effects as large businesses.

True or False

False

Identify a legal question that an employer can ask during an interview.

• "Are you a Republican or a Democrat?"

• "Do you have a Social Security number?"

• "Are you married?"

• "Are you heterosexual or homosexual?"

"Do you have a Social Security number?"

Which of the following statements is true of a family business?

• Managing family members is quite easy as the individuals know each other well.

• A family business gives no importance to human resource management.

• A family business is generally run by and for the benefit of a particular family.

• Issues of discrimination within a family business are eliminated if the firm is large.

A family business is generally run by and for the benefit of a particular family.

Human resources in family businesses are critical, but since family members make up many of the significant employees in the company, everything becomes more complicated.

True or False

True

The rates of workers' compensation insurance for individual firms within a particular state are fairly standard and are generally based on the industry and size of the firm.

True or False

False

An example of a benefit a company can offer is

• 401(k)

• sick leave.

• All of these choices are correct.

• retirement plans.

All of these choices are correct.

In an interview, an interviewer can ask questions about

• disability.

• arrest record.

• religion.

• prior convictions.

prior convictions.

Which of the following statements is true of workers’ compensation?

• It is limited to partial wage replacement and medical bills acquired while treating the injury caused at the workplace.

• It is given to an employee who qualifies for the compensation, regardless of the fault of the owner.

• All of these choices are correct.

• Once an employee accepts workers’ compensation, they cannot sue the entrepreneur for the injury caused due to unsafe working conditions.

All of these choices are correct.

The time period for which profit sharing or bonuses are given should be relevant to the individuals in a firm and within the realities and constraints of the business.

True or False

True

Which of the following statements is true of the Civil Rights Act?

• It provides that each and every business must provide unfettered access to all disabled people.

• It currently applies to all firms with more than 15 employees.

• It ensures that all individuals are judged according to the discretion of an entrepreneur.

• It allows for the promotion of the differently abled employees irrespective of their performance.

It currently applies to all firms with more than 15 employees.

The success of entrepreneurial firms pursuing new opportunities requires a number of deliberate actions by the business founder concerning human resources issues.

True or False

True

Which of the following statements is true of the Fair Labor Standards Act (FLSA)?

• It requires that all nonexempt employees who work over 40 hours a week should be paid at the rate of time and a half.

• It allows an entrepreneur to employee children under the age of 15 years if they can establish the safety of the working environment.

• It provides that each and every business must provide unfettered access to all disabled people.

• It sets a minimum wage for all workers, including workers on small farms and administrative employees.

It requires that all nonexempt employees who work over 40 hours a week should be paid at the rate of time and a half.

OSHA stands for Office Standards and Health Administration.

True or False

False

Large firms can absorb bad employees easier than small businesses because they have organizational slack.

True or False

True

If a job is more central to an organization and has higher required skill levels than other positions, then the importance of employee references decreases.

True or False

False

The government regulates the employment of children under the age of

• 21.

• 16.

• 18.

• 20.

16

Which of the following terms means a set amount of compensation for a given time period?

• salary

• bonus

• commission

• profit

salary

Human resources, as defined in economics, is the ________ and ________ of human effort directed toward producing goods and services.

• creation; utilization

• development; production

• production; termination

• quantity; quality

quantity; quality