Identifying Entrepreneurial Opportunity Chapter 5 Test Bank

Chapter 5: Identifying Entrepreneurial Opportunity

= Correct answer

Multiple Choice/Fill in the Blank

1. According to the text, which of these is the motivation behind many entrepreneurial ideas?

A. acquiring enormous sums of wealth

B. avoiding working for someone else

C. resolving large social economic problems

D. solving small everyday problems

Difficulty: Easy

1. In order to determine if it is the right time to start a new business, aspiring entrepreneurs must consider the existence of which of the following criteria?

A. innovative product idea, investors, and favorable market conditions

B. passion, skilled staff, and unmet market need

C. adequate market demand, small market size, and resources

D. significant market demand, significant market size, and significant resources

Difficulty: Easy

1. Uber, Lyft, and DoorDash are examples of which type of economy?

A. entrepreneurial economy

B. virtual economy

C. market economy

D. shared economy

Difficulty: Easy

1. Netflix started in 1997 as an online movie rental service. Users could browse the online catalog and order DVDs to be delivered to their homes. Today it is a streaming platform. As the company’s success grew, several chains of storefront video rental businesses went out of business. This phenomenon is known as ________.

A. competition

B. creative destruction

C. innovation

D. takeover

Difficulty: Moderate

1. According to the text, Schumpeter described the cyclical destruction and creation of new businesses as ________.

A. designed to increase company efficiency

B. designed to help entrepreneurs

C. natural in a capitalist system

D. natural in a socialist system

Difficulty: Easy

1. During World War II, the U.S. military used plastics in weapons and motor vehicles. Following the war, plastics manufacturers began to produce products that consumers could use in their homes. This is most closely related to which step in Schumpeter’s progression for finding new business opportunities?

A. Develop a new market for an existing product.

B. Find a new supply of resources to produce the product.

C. Use existing technology to produce an old product a new way.

D. Use new technology to produce a new product.

Difficulty: Moderate

1. Which of the following combinations creates the greatest entrepreneurial opportunity?

A. high supply, low demand

B. high supply, high demand

C. low supply, high demand

D. low supply, low demand

Difficulty: Moderate

1. In deciding whether to start their business, the founders of Netflix needed to determine if there were enough people interested in renting their DVDs through the Internet to make their investment worth the time and effort. They needed to determine the ________ of the venture.

A. expediency

B. feasibility

C. practicality

D. viability

Difficulty: Difficult

1. Which of the following is data that an entrepreneur can derive from demographics research?

A. attitude

B. disposable income

C. ethnicity

D. voting behavior

Difficulty: Moderate

1. According to the text, Sara Blakely developed the ability to adapt to difficult or challenging circumstances as the result of events in her childhood. This ability is also known as ________.

A. elasticity

B. hardiness

C. persistence

D. resilience

Difficulty: Moderate

1. Which of the following is a reason to avoid considering tax incentives as a permanent pillar of a value proposition or business model?

A. high competition

B. high interest rates

C. low consumer interest

D. short duration

Difficulty: Moderate

1. According to David Pridham of Dominion Harbor Group, the growth in this type of worker has contributed to the excellent conditions for startups and small businesses in the current decade.

A. at-will

B. freelance

C. part-time

D. temporary

Difficulty: Easy

1. According to David Pridham of Dominion Harbor Group, intellectual property accounted for ________ percent of the total gross domestic product (GDP) in the United States in 2020.

A. 18.2

B. 28.2

C. 38.2

D. 48.2

Difficulty: Easy

1. In 1998, The U.S. Department of Justice and twenty state attorney generals sued Microsoft. They accused Microsoft of illegally protecting the monopoly it had on its operating system and attempting to prevent competition to its browser, Internet Explorer. Microsoft lost the case. What was eliminated as a result?

A. absolute advantage

B. competition

C. kill zone

D. positional goods

Difficulty: Difficult

1. Which of the following describes the process by which entrepreneurs evaluate product ideas, strategies, and marketing trends?

A. feasibility screening

B. idea screening

C. opportunity screening

D. viability screening

Difficulty: Easy

1. An entrepreneur wants to conduct research on a potential business opportunity. Which of the following is an example of a primary source?

A. bibliographies

B. periodicals

C. public opinion polls

D. textbooks

Difficulty: Moderate

1. Which of the following is an example of due diligence performed by an entrepreneur?

A. checking for health and environmental hazards before investing

B. raising capital and completing merger and acquisition transactions

C. understanding the process of starting and funding the venture

D. understanding the terms of the transaction and the contract

Difficulty: Moderate

1. In order for an idea to become a recognized opportunity, there must be significant market demand, significant structure and size, and ________.

A. significant buy-in and profitability

B. significant equity and investment

C. significant margins and resources

D. significant supply and demand

Difficulty: Moderate

1. If the costs of a venture are too high and the profit is too low, the entrepreneur may need to consider whether the venture is ________.

A. attainable

B. feasible

C. sustainable

D. viable

Difficulty: Moderate

1. Which of the following is an example of a gig economy worker?

A. a couple who rents out part of their home to travelers

B. a woman who researches and writes an article for a magazine

C. a man who uses his vehicle to take clients to appointments

D. a man who uses his vehicle to pick up groceries

Difficulty: Difficult

1. Which type of analysis uses a grid to compare the all the vendors that provide the same product or service in an area?

A. competitive analysis

B. PEST analysis

C. SWOT analysis

D. three circles

Difficulty: Easy

1. Mr. Patel is conducting research in his target market to see if the product he designed delivers different benefits than those of his nearest competitor. He is most likely trying to determine whether his product has a ________.

A. comparative advantage

B. competitive advantage

C. differentiation advantage

D. market advantage

Difficulty: Moderate

1. What is the purpose of a three circles competitive analysis?

A. to determine the political and economic influences on a venture

B. to identify gaps in the market that a new venture could fill

C. to identify strengths internal to the entrepreneur

D. to take advantage of opportunities to develop the venture

Difficulty: Moderate

1. You are performing a SWOT analysis for a new venture. Which of the following is an example of a factor that is internal to the entrepreneur?

A. competition

B. market shrinkage

C. professional network

D. technology

Difficulty: Difficult

1. Which of the following is one advantage of a PEST analysis over a SWOT analysis?

A. A PEST analysis considers the internal factors of an organization.

B. A PEST analysis includes consideration of political and economic factors.

C. A PEST analysis clearly identifies opportunities available for a venture.

D. A PEST analysis identifies threats specific to the venture.

Difficulty: Moderate

True/False

1. True or false? Most entrepreneurial opportunities come from recognizing a problem and trying to solve it.

Difficulty: Easy

1. True or false? In order for entrepreneurial innovation to be successful, it must maintain the social and economic status quo.

Difficulty: Easy

1. True or false? Changes in business advance the economy, improve our lifestyles, and always add to the existing products and industries in a society.

Difficulty: Moderate

1. True or false? The emergence of ride-sharing services like Uber and Lyft is an example of creative destruction.

Difficulty: Easy

1. True or false? In considering entrepreneurial opportunities, feasibility means that the new product or service can be produced.

Difficulty: Difficult

1. True or false? Opportunity screening focuses on the political and economic climate of the market for which the product or service is being considered.

Difficulty: Moderate

1. True or false? US Census data can help aspiring entrepreneurs know if they need to provide products and services to their markets in multiple languages.

Difficulty: Moderate

1. True or false? Primary sources include published research from questionnaires.

Difficulty: Difficult

1. True or false? Before acquiring Company A, the executives and lawyers conducted an audit of Company A’s financial records. This is an example of due diligence.

Difficulty: Moderate

1. True or false? Significant market structure means that a product or service has value because it provides a solution that the target market is willing to purchase.

Difficulty: Moderate

1. True or false? Demographics include statistical factors of a population, including age, race, and gender.

Difficulty: Easy

1. True or false? PRIZM data can show entrepreneurs specific lifestyle traits of a population within a certain zip code.

Difficulty: Moderate

1. True or false? A competitive analysis provides information about how competitors market their products and services.

Difficulty: Easy

1. True or false? The text advises entrepreneurs to perform a SWOT analysis before doing a three circles analysis or a competitive analysis grid.

Difficulty: Difficult

1. True or false? Information gained from a SWOT analysis can be used in a PEST analysis.

Difficulty: Moderate

Short Answer

1. Describe a real-life example of an entrepreneurial idea and how it solved an everyday problem.

Difficulty: Moderate

1. What is the difference between an entrepreneurial idea and an entrepreneurial opportunity?

Difficulty: Easy

1. Describe an example of creative destruction.

Difficulty: Moderate

1. Describe the relationship between supply and demand.

Difficulty: Easy

1. Describe one of the recent drivers for change in the entrepreneurial space.

Difficulty: Easy

1. What is one difference between a freelancer and an entrepreneur?

Difficulty: Moderate

1. What is the difference between primary research and secondary research? What are the pros and cons of each type of research? Provide examples.

Difficulty: Moderate

1. What are the three criteria that must be met in order for an entrepreneurial idea to be recognized as an entrepreneurial opportunity?

Difficulty: Easy

1. Describe one of the many reasons new small businesses fail. Provide an example.

Difficulty: Moderate

1. Ms. Lee invented a new product and has decided to start a business to sell the product. She needs to develop a business model. Describe the four most important components of the business model that she needs to have.

Difficulty: Moderate

1. Complete a three circles analysis for a business idea you have. Based on the results, write your unique selling proposition.

Difficulty: Difficult

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