True/False Questions
1. T F Alexis de Tocqueville was impressed by the way America was being built by large industrial
companies.
Ans: False LO: 1 Page: 3 AACSB: Analytic
2. T F The Small Business Administration (SBA) estimates that there are over 220 million small
businesses in the United States.
Ans: False LO: 1 Page: 3 AACSB: Analytic
3. T F The Small Business Administration (SBA) estimates that there are 25.8 million small businesses in
the United States.
Ans: True LO: 2 Page: 3 AACSB: Analytic
4. T F According to the Small Business Administration, 52 percent of all small businesses are home
based.
Ans: True LO: 1 Page: 3 AACSB: Analytic
5. T F Of all U.S. companies exporting goods, few are classified as small businesses.
Ans: False LO: 2 Page: 4 AACSB: Analytic
6. T F Over 99 percent of all businesses are classified as small.
Ans: True LO: 1 Page: 4 AACSB: Analytic
7. T F Small businesses create more than 50 percent of all private U.S. gross domestic product (GDP).
Ans: True LO: 2 Page: 4 AACSB: Analytic
8. T F According to Figure 1.1, almost all businesses are small businesses.
Ans: True LO: 1 Page: 4 AACSB: Analytic
9. T F There are several definitions for small business; however, the most common criterion is the number
of employees working for that business.
Ans: True LO: 1 Page: 5 AACSB: Analytic
10. T F A manufacturer with fewer than 500 employees is classified as a small business.
Ans: True LO: 1 Page: 5 AACSB: Analytic
11. T F The industry that employs the largest number of people in small business is the finance and
insurance industry
Ans: False LO: 2 Page: 6 AACSB: Analytic
12. T F The manufacturing industry employs the greatest number of people in small business.
Ans: False LO: 2 Page: 6 AACSB: Analytic
13. T F In the construction industry 90 percent of the companies are classified as small businesses.
Ans: True LO: 1 Page: 6 AACSB: Analytic
14. T F The common size standard for a service or retail business to be classified as a small business is $6
million in average annual sales.
Ans: True LO: 1 Page: 6 AACSB: Analytic
15. T F According to Figure 1.2, a majority of businesses in the education service sector are small.
Ans: False LO: 1 Page: 6 AACSB: Analytic
16. T F A company with over $200 million in annual revenue like Boston Beer Company can be classified
as a small business because it has relatively little impact on its industry.
Ans: True LO: 1 Page: 7 AACSB: Reflective Thinking
17. T F Economy of scale is the lowering of costs through production of larger quantities.
Ans: True LO: 2 Page: 7 AACSB: Analytic
18. T F Until the early 1800s, much of the U.S. economy was based on agriculture.
Ans: True LO: 2 Page: 7 AACSB: Analytic
19. T F In the late 1950s and early 1960s, a major paradigm shift occurred in business. This paradigm shift
was called the management concept.
Ans: False LO: 2 Page: 7 AACSB: Analytic
20. T F The marketing concept was a paradigm shift that focused on new advertising media.
Ans: False LO: 2 Page: 7 AACSB: Analytic
21. T F Outsourcing refers to the practice of reducing the size of a firm’s workforce.
Ans: False LO: 2 Page: 8 AACSB: Analytic
22. T F The number of small businesses has more than doubled in the last 30 years.
Ans: True LO: 2 Page: 8 AACSB: Analytic
23. T F The Kauffman Foundation shows that interest in entrepreneurship on campuses is high, with almost
2,000 colleges offering courses on the subject.
Ans: True LO: 2 Page: 8 AACSB: Analytic
24. T F According to SBA reports, Hispanic-owned businesses generate the most annual revenue of all U.S.
minority-owned businesses.
Ans: False LO: 3 Page: 9 AACSB: Diversity
25. T F Census and Bureau of Labor Statistics data show that self employment rose over 12 percent from
1995 to 2004.
Ans: True LO: 2 Page: 9 AACSB: Analytic
26. T F Asian-owned businesses totaled over 1.1 million, generating over $326 billion of annual revenue.
Ans: True LO: 3 Page: 9 AACSB: Diversity
27. T F Of all U.S. businesses, almost 50 percent are Hispanic-owned.
Ans: False LO: 3 Page: 10 AACSB: Diversity
28. T F Women owned more than 50 percent of U.S. businesses in 2001.
Ans: False LO: 3 Page: 10 AACSB: Diversity
29. T F Compared to non-Hispanic white business owners, minority groups in the United States have larger
shares of women business owners.
Ans: True LO: 3 Page: 10 AACSB: Diversity
30. T F Although small businesses tend to enjoy a higher profit margin due to their economies of scale,
large businesses are often better at distribution.
Ans: False LO: 4 Page: 11 AACSB: Analytic
31. T F Diversity in the workplace is changing the way our nation and our businesses operate.
Ans: True LO: 3 Page: 11 AACSB: Diversity
32. T F Big businesses need small businesses.
Ans: True LO: 4 Page: 11 AACSB: Analytic
33. T F A symbiotic relationship exists between small business and big business.
Ans: True LO: 4 Page: 11 AACSB: Analytic
34. T F The stronger and more sustainable the competitive advantage, the better the chance of winning and
consequently keeping customers.
Ans: True LO: 4 Page: 11 AACSB: Analytic
35. T F Small business is able to react less quickly to new and changing markets than is large business with
its increased economies of scale.
Ans: False LO: 4 Page: 12 AACSB: Analytic
36. T F The ability to remain flexible and innovative is an inherent factor in the favor of small businesses.
Ans: True LO: 4 Page: 12 AACSB: Analytic
37. T F Computers are an invention that small business has contributed to society.
Ans: True LO: 4 Page: 12 AACSB: Technology
38. T F Service innovation involves offering a new or altered service for sale.
Ans: True LO: 5 Page: 13 AACSB: Analytic
39. T F Most small businesses use market research as the primary means of learning about customers.
Ans: False LO: 5 Page: 13 AACSB: Analytic
40. T F Creative destruction refers to the failure of small businesses due to fault of their own.
Ans: False LO: 4 Page: 13 AACSB: Analytic
41. T F Economist Joseph Schumpeter called the replacement of existing products, processes, ideas, and
businesses with new and better ones creative destruction.
Ans: True LO: 4 Page: 13 AACSB: Analytic
42. T F The lifeblood of any new business is cash/sufficient startup capital.
Ans: True LO: 4 Page: 14 AACSB: Analytic
43. T F Most new businesses do not survive past their first year.
Ans: False LO: 5 Page: 14 AACSB: Analytic
44. T F The most common cause of business failure is inadequate management and financing.
Ans: True LO: 6 Page: 16 AACSB: Analytic
45. T F Lack of marketing experience is one of the major problems faced by small business owners.
Ans: False LO: 6 Page: 16 AACSB: Analytic
46. T F External factors beyond a small business owner’s control are to blame for most business failures.
Ans: False LO: 6 Page: 17 AACSB: Analytic
Multiple-Choice Questions
47. According to the opening Vignette, Elon Musk is an example of a
a) Franchiser
b) Serial entrepreneur
c) Corporate business owner
d) First-time entrepreneur
Ans: b LO: 1 Page: 3 AACSB: Analytic
48. What percentage of net new jobs do small businesses create annually?
a) From 10 to 25 percent
b) From 40 to 50 percent
c) From 60 to 80 percent
d) From 85 to 100 percent
Ans: c LO: 2 Page: 4 AACSB: Analytic
49. What percentage of businesses had a payroll with fewer than 500 people?
a) 10 percent
b) 25 percent
c) 75 percent
d) 98 percent
Ans: d LO: 1 Page: 4 AACSB: Analytic
distributed with a certain product or service or otherwise on a password-protected website for classroom use.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller evileye251. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £20.49. You're not tied to anything after your purchase.
