Question 1

________ are(is) generated when increasing production lowers the average cost of each unit produced.
A) Business scalability
B) Economies of scale
C) Reaching for scale
D) Market leadership
E) Economies of scope

Accepted Answer

Economies of scale refer to the cost advantages experienced by firms when they increase their level of production. This results in a decrease in the average cost of each unit produced.

Question 2

Which of the following is not one of the 10 warning signs that a business is growing too fast?
A) those working with the business's financial structure are starting to worry
B) productivity is falling
C) e-mail starts going unanswered
D) borrowing money to pay for routine operating expenses
E) comfortable profit margins

Accepted Answer

The other options (A, B, C, and D) all suggest issues that arise when a business is growing too fast, such as financial concerns, decreased productivity, and relying on borrowing to fund day-to-day operations. However, comfortable profit margins are not typically seen as a warning sign of fast growth, but rather a positive sign of a healthy and well-performing business.

Question 3

In regard to firm growth, evidence shows that:
A) relatively few firms generate sustained and profitable growth
B) the majority of firms generate sustained and profitable growth
C) an equal number of firms generate sustained and profitable growth than firms that don't
D) firms in the manufacturing sector are more likely to achieve sustained and profitable growth than firms in the service sector
E) firms in the service sector are more likely to achieve sustained and profitable growth than firms in the manufacturing sector

Accepted Answer

C

Question 4

Andy Dungy owns a company that makes Apple iPod, iPhone, and iPad accessories. He is trying to increase his sales, primarily because he knows that increasing production lowers the average cost of each unit produced. The reason for growth illustrated in this example is:
A) economies of scope
B) market leadership
C) influence, power, and survivability
D) need to accommodate the growth of key customers
E) economies of scale

Accepted Answer

The reason for growth in this example is economies of scale, as the owner wants to increase production to lower the average cost of each unit produced. This is a classic example of economies of scale, where the unit cost of production decreases as the volume of production increases.

Question 5

________ are costs that a company incurs whether it sells something or not. ________ are the costs a company incurs as it generates sales.
A) Preset costs, Marginal costs
B) Variable costs, Fixed costs
C) Set costs, Marginal costs
D) Fixed costs, Variable costs
E) Marginal costs, Set costs

Accepted Answer

Fixed costs are costs that a company incurs regardless of sales volume, such as overhead costs like rent or salaries. Variable costs, on the other hand, are costs that increase as sales increase, such as material costs or sales commissions.

Question 6

PurBlue Beverages, the company profiled in the opening feature for Chapter 13, sells bottled water, under the GIVE brand. GIVE bottled water has not one but two unusual twists. First, 10 cents of every bottle sold is donated to charity. And second:
A) the bottles come in four colors (each color representing a charity), allowing the buyer to choose which charity his or her donation would go to
B) the bottles come in four sizes, allowing the buyer to determine which size to buy
C) the bottles come in four shapes, each shape representing a different environmental cause
D) the bottles are biodegradable and break down within six months of being used
E) the bottles come with seven different labels, each label providing information about a local charity

Accepted Answer

The bottles come in four colors, each representing a different charity, allowing the buyer to choose which charity 10 cents of their purchase will be donated to.

Question 7

Barb Campbell owns an entertainment company which has increased both its profits and revenues over an extended period of time. Barb's firm is experiencing:
A) resolute growth
B) unrelenting growth
C) sustained growth
D) unbroken growth
E) moderate growth

Accepted Answer

Sustained growth refers to a steady increase in profits and revenues over an extended period of time. This is the case with Barb's entertainment company, as mentioned in the question. The other options, such as unrelenting, unbroken, or resolute growth, imply a more aggressive or intense rate of growth than what is described in the question. Moderate growth, on the other hand, suggests a slower rate of growth than what is indicated by the question. Therefore, C) sustained growth is the best choice.

Question 8

Jeremy Rhodes leases a manufacturing facility that produces computer keyboards. Jeremy tries to keep production high, because his lease payments are $6,200 a month, regardless of whether he produces one computer keyboard a month or 10,000. Jeremy's lease payment is a:
A) variable cost
B) secondary cost
C) fixed cost
D) marginal cost
E) tangible cost

Accepted Answer

Fixed costs are expenses that do not vary with changes in the volume of goods or services produced. In this case, Jeremy's lease payment is a fixed cost because it remains constant regardless of production levels.

Question 9

________ costs are costs that a company incurs whether it sells something or not.
A) Fixed
B) Consistent
C) Steady
D) Variable
E) Regular

Accepted Answer

Fixed costs are costs that do not vary with the level of production or sales. They are incurred by the company no matter what, and can include expenses such as overhead, rent, salaries, and equipment.

Question 10

The Savvy Entrepreneurial Firm feature in Chapter 13 focuses on Dogfish Head Brewery, a microbrewery located in Milton, Delaware. During the first few years of the firm's existence, one tactic the founder employed during the winter months, to gain the loyalty of local businesses and their customers, was to:
A) distribute fliers via local businesses offering off-season discounts with coupons that could be redeemed at the company's restaurant and brewery
B) offer free delivery from the company's brewery and restaurant
C) offer free tours of the company's brewery
D) offer 10% discounts to Delaware residents and 30% discounts to Milton residents
E) hold contests to name the company's different varieties of beer after local landmarks and citizens

Accepted Answer

The founder distributed fliers via local businesses offering off-season discounts with coupons that could be redeemed at the company's restaurant and brewery to gain loyalty.

Question 11

In the context of firm growth, gazelles are:
A) firms that grow at a rate of 100% per year or more
B) firms that grow at a rate of 25% per year or more
C) rapid growth firms
D) slow growth firms
E) moderate growth firms

Accepted Answer

Gazelles are typically defined as rapid growth firms, often characterized by their ability to grow revenues or employment at a fast pace over a short period.

Question 12

According to the textbook, there are three important things that a business can do to prepare for growth:
A) plan for growth, adopt a growth-oriented business model, and stay committed to a core strategy
B) appreciate the nature of business growth, stay committed to a core strategy, and plan for growth
C) develop a viral marketing campaign, stay committed to a core strategy, and adopt a growth-oriented business model
D) develop business partnerships, diversify beyond the company's core strategy, and appreciate the nature of business growth
E) retain or hire one or more business growth consultants, diversify beyond the company's core strategy, and plan for growth

Accepted Answer

The textbook identifies three important things a business can do to prepare for growth, which are: appreciate the nature of business growth, stay committed to a core strategy, and plan for growth. Option A includes these three things and is therefore the correct choice. Option C includes "develop a viral marketing campaign," which is not one of the three important things identified in the textbook. Option D includes "develop business partnerships" and "diversify beyond the company's core strategy," neither of which are among the three important things identified in the textbook. Option E includes "retain or hire one or more business growth consultants," which is not one of the three important things identified in the textbook.

Question 13

According to the textbook, the businesses that have the potential to grow the fastest over a sustained period of time are ones that:
A) solve a significant problem or have a major impact on their customers' productivity or lives
B) are cost leaders and promote themselves aggressively
C) have a major impact on their customers' lives and sell high quality products
D) take advantage of environmental trends and are cost leaders
E) solve a significant problem or sell high quality products

Accepted Answer

Businesses that solve a significant problem or have a major impact on their customers' productivity or lives are more likely to experience sustained growth because they provide a valuable solution or service to their customers. This can lead to customer loyalty and positive word-of-mouth, which can drive growth. Additionally, businesses that solve a significant problem or have a major impact on their customers' lives often have a unique and defensible business model, which can help them stay ahead of competitors.

Question 14

According to a study sponsored by the SBA Office of Advocacy, only ________ of all firms are "gazelles" or rapid growth firms at any given time.
A) 3%
B) 7%
C) 12%
D) 19%
E) 27%

Accepted Answer

The answer of According to a study sponsored by the...

Question 15

The Partnering for Success feature in Chapter 13 focuses on Threadless, the popular community-centered T-shirt design site. According to the feature, at one point during its early growth, Threadless almost collapsed under the weight of operational problems. Threadless solved the problem by:
A) hiring professional managers
B) replacing the founder CEO with a seasoned CEO from an established company
C) hiring a consulting firm
D) selling a minority interest to a venture capital firm, which provided Threadless operational assistance
E) merging with Zappos and folding its operations into Zappos' operations

Accepted Answer

Threadless solved its operational problems by selling a minority interest to a venture capital firm, which provided operational assistance.

Question 16

________ costs are the costs a company incurs as it makes sales.
A) Static
B) Irregular
C) Balanced
D) Variable
E) Flexible

Accepted Answer

Variable costs are the costs that vary with the level of production or sales. They increase or decrease in proportion to the level of activity. Therefore, the costs a company incurs as it makes sales are variable costs.

Question 17

Which of the following options was not identified in the textbook as an appropriate reason for growth?
A) need to accommodate the growth of key customers
B) influence, power, and survivability
C) economies of scale
D) market leadership
E) maintain the appearance that the firm is successful

Accepted Answer

Maintaining the appearance that the firm is successful was not identified in the textbook as an appropriate reason for growth. The other options (A, B, C, and D) were all mentioned as potential reasons for a company to pursue growth.

Question 18

According to the textbook, most entrepreneurial firms:
A) are ambivalent about growth
B) want to grow
C) do not want to grow
D) want to grow if the economy is strong but do not want to grow if the economy is weak
E) want to grow if they are a service firm but do not want to grow if they are a manufacturing firm

Accepted Answer

The textbook states that most entrepreneurial firms want to grow, as growth is often a key driver for their success and can lead to increased profits and competitiveness in the market.

Question 19

Economies of scale occur when:
A) increasing production lowers the average cost of each unit produced
B) increasing production increases the average cost of each unit produced
C) decreasing production lowers the average cost of each unit produced
D) decreasing production increases the average cost of each unit
E) increasing production increases the fixed cost of doing business

Accepted Answer

Economies of scale occur when increasing production lowers the average cost of each unit produced. This is because fixed costs (such as rent or machinery) are spread over a larger number of units, resulting in lower average costs per unit.

Question 20

According to the textbook, there are three issues about business growth that entrepreneurs should appreciate. These issues are:
A) not all businesses have the potential to be aggressive growth firms, business success scales, and business growth is a top priority of most entrepreneurial firms
B) business growth is a top priority of most entrepreneurial firms, a business can't grow too fast, and businesses that price their products aggressively grow the fastest
C) a business's valuation increases with its growth, a business can grow too fast, and business growth is a top priority of most entrepreneurial firms
D) the majority of businesses have the potential to be aggressive growth firms, a business can't grow too fast, and business success scales
E) not all businesses have the potential to be aggressive growth firms, a business can grow too fast, and business success doesn't always scale

Accepted Answer

According to the textbook, the three issues about business growth that entrepreneurs should appreciate are that not all businesses have the potential to be aggressive growth firms, a business can grow too fast, and business success doesn't always scale. Option A and B are incorrect because they include statements that are not supported by the textbook, such as "business success scales" and "businesses that price their products aggressively grow the fastest." Option C is incorrect because while a business's valuation may increase with growth, it is not one of the three main issues discussed in the textbook. Option D is incorrect because it states that the majority of businesses have the potential to be aggressive growth firms, which is not supported by the textbook.

Quiz 13: Preparing for and Evaluating the Challenges of Growth

________ are(is) generated when increasing production lowers the average cost of each unit produced.

Which of the following is not one of the 10 warning signs that a business is growing too fast?

In regard to firm growth, evidence shows that:

Andy Dungy owns a company that makes Apple iPod, iPhone, and iPad accessories. He is trying to increase his sales, primarily because he knows that increasing production lowers the average cost of each unit produced. The reason for growth illustrated in this example is:

are costs that a company incurs whether it sells something or not. are the costs a company incurs as it generates sales.

PurBlue Beverages, the company profiled in the opening feature for Chapter 13, sells bottled water, under the GIVE brand. GIVE bottled water has not one but two unusual twists. First, 10 cents of every bottle sold is donated to charity. And second:

Barb Campbell owns an entertainment company which has increased both its profits and revenues over an extended period of time. Barb's firm is experiencing:

Jeremy Rhodes leases a manufacturing facility that produces computer keyboards. Jeremy tries to keep production high, because his lease payments are $6,200 a month, regardless of whether he produces one computer keyboard a month or 10,000. Jeremy's lease payment is a:

________ costs are costs that a company incurs whether it sells something or not.

In the context of firm growth, gazelles are:

According to the textbook, there are three important things that a business can do to prepare for growth:

According to the textbook, the businesses that have the potential to grow the fastest over a sustained period of time are ones that:

According to a study sponsored by the SBA Office of Advocacy, only ________ of all firms are "gazelles" or rapid growth firms at any given time.

The Partnering for Success feature in Chapter 13 focuses on Threadless, the popular community-centered T-shirt design site. According to the feature, at one point during its early growth, Threadless almost collapsed under the weight of operational problems. Threadless solved the problem by:

________ costs are the costs a company incurs as it makes sales.

Which of the following options was not identified in the textbook as an appropriate reason for growth?

According to the textbook, most entrepreneurial firms:

Economies of scale occur when:

According to the textbook, there are three issues about business growth that entrepreneurs should appreciate. These issues are: