Ch 3 Pre-test Ent

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| By Obinno Coley
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Obinno Coley
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Quizzes Created: 1 | Total Attempts: 282
| Attempts: 282
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About This Quiz

The 'Ch 3 Pre-Test ENT' assesses knowledge on business ownership types, advantages of partnerships, wholesaling businesses, and corporate funding. It focuses on the structural shifts in the American economy, highlighting the rise of service and trade industries.

Entrepreneurship Quizzes & Trivia

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  • 2. 

    Retailers resell products purchased from wholesaling businesses.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Retailers typically purchase products from wholesalers, who act as intermediaries between manufacturers and retailers. Wholesalers buy products in bulk from manufacturers at a discounted price and then sell them to retailers, who in turn sell the products to consumers at a higher price. This allows retailers to have a variety of products to offer to their customers without having to directly deal with manufacturers. Therefore, the statement that retailers resell products purchased from wholesaling businesses is true.

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  • 3. 

    C corporations and S corporations differ in how they are taxed.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    C corporations and S corporations do indeed differ in how they are taxed. C corporations are subject to double taxation, meaning that the corporation itself is taxed on its profits, and then the shareholders are taxed on any dividends they receive. On the other hand, S corporations are pass-through entities, which means that the corporation itself does not pay taxes. Instead, the profits and losses of the corporation are passed through to the shareholders, who report them on their individual tax returns. Therefore, the statement is true.

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  • 4. 

    Most business start-ups in recent years have been service businesses.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The statement suggests that a majority of new businesses established in recent years belong to the service industry. This aligns with the trend observed in the business landscape, where there has been a significant rise in service-based startups compared to traditional manufacturing or product-oriented businesses. The shift towards service businesses can be attributed to various factors such as the growth of the digital economy, the rise of remote work, and the increasing demand for specialized services.

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  • 5. 

    A corporation is easier to set up than a sole proprietorship.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    Setting up a corporation is generally more complex and time-consuming compared to establishing a sole proprietorship. Corporations require more legal formalities, such as drafting articles of incorporation, filing with the state, and issuing stock certificates. Additionally, corporations often have more regulatory and reporting requirements, such as holding regular board meetings and filing annual reports. On the other hand, setting up a sole proprietorship is relatively straightforward, usually only requiring the individual to start doing business under their own name or a trade name. Therefore, the statement that a corporation is easier to set up than a sole proprietorship is false.

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  • 6. 

    The level of liability depends on the type of business ownership.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The level of liability in a business depends on the type of ownership because different types of ownership structures have different levels of personal liability for the business's debts and obligations. For example, in a sole proprietorship or a general partnership, the owner(s) have unlimited personal liability, meaning they are personally responsible for all debts and legal obligations of the business. On the other hand, in a corporation or a limited liability company (LLC), the owners' liability is limited to their investment in the business, and their personal assets are protected from business debts. Therefore, it is true that the level of liability varies based on the type of business ownership.

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  • 7. 

    A limited liability company is owned by its stockholders.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    A limited liability company (LLC) is not owned by its stockholders. Unlike a corporation, an LLC does not issue stock. Instead, it is owned by its members, who have ownership interests in the company. These ownership interests are typically represented by membership units, similar to shares of stock in a corporation. Therefore, the correct answer is false.

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  • 8. 

    Which of the following statements about corporations is true?

    • Corporations are easier to set up than sole proprietorships

    • A limited partnership is a type of corporation

    • Corporations sell stock to raise money

    • A cooperative is a type of corporation

    Correct Answer
    A. Corporations sell stock to raise money
    Explanation
    Corporations sell stock to raise money. This means that corporations have the ability to issue shares of stock to investors in exchange for capital. By selling stock, corporations can generate funds that can be used for various purposes such as expanding operations, investing in new projects, or paying off debts. This method of raising money is one of the key advantages of the corporate structure, as it allows corporations to access a larger pool of capital compared to other business entities like sole proprietorships or partnerships.

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  • 9. 

    McDonald’s restaurants are manufacturing businesses.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    McDonald's restaurants are not considered manufacturing businesses. They are classified as service businesses within the food industry. While they do produce food products, the primary focus of McDonald's is on providing a service - preparing and serving meals to customers. Manufacturing businesses, on the other hand, typically involve the production of goods through a systematic process of transforming raw materials into finished products.

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  • 10. 

    One advantage of a corporation as compared to a sole proprietorship is ...

    • A corporation is easier to set up and requires less paperwork

    • A corporation provides limited liability for its owners

    • Is set up to make profits for its investors

    • Is set up to pay dividends to its shareholders

    Correct Answer
    A. A corporation provides limited liability for its owners
    Explanation
    A corporation provides limited liability for its owners, which means that the owners are not personally responsible for the debts and obligations of the corporation. This is an advantage compared to a sole proprietorship where the owner is personally liable for all business debts. Limited liability protects the personal assets of the owners and reduces their financial risk.

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  • 11. 

    Most wholesalers sell directly to the public.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The statement says that most wholesalers sell directly to the public, but this is not true. Wholesalers typically sell their products in bulk to retailers or other businesses, rather than selling directly to individual consumers. Wholesalers act as intermediaries between manufacturers or producers and retailers, helping to distribute goods efficiently. Therefore, the correct answer is false.

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  • 12. 

    A business owner with unlimited liability...

    • Could have to sacrifice personal money and possessions to pay business debt

    • Is not personally responsible for the debts of the business

    • Is a shareholders of a corporation

    • Would not have to sacrifice personal money and possessions to pay business debt

    Correct Answer
    A. Could have to sacrifice personal money and possessions to pay business debt
    Explanation
    A business owner with unlimited liability could have to sacrifice personal money and possessions to pay business debt because unlimited liability means that the owner is personally responsible for all debts and obligations of the business. This means that if the business is unable to pay its debts, the owner may be required to use their personal assets to cover the outstanding amounts. This is different from limited liability, where the owner's personal assets are protected and they are not personally responsible for the debts of the business.

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  • 13. 

    Which of the following phrases best describes a wholesaling business?

    • A business that converts materials into products for sale

    • A business that sells products to final buyers

    • A business that performs services

    • A business that sells products to retailers

    Correct Answer
    A. A business that sells products to retailers
    Explanation
    A wholesaling business refers to a business that sells products to retailers. Wholesalers act as intermediaries between manufacturers or producers and retailers, buying goods in bulk and then selling them in smaller quantities to retailers who will ultimately sell them to the final consumers. This type of business focuses on the distribution and supply chain aspect, providing products to retailers at a lower price and in larger quantities than they would be able to obtain directly from the manufacturers.

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  • 14. 

    Entrepreneurs with limited liability put their personal assets at risk.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    Entrepreneurs with limited liability do not put their personal assets at risk. Limited liability means that the entrepreneur's personal assets are protected and cannot be used to satisfy the debts or liabilities of the business. This is one of the main advantages of operating as a limited liability entity, as it provides a level of financial protection for the entrepreneur. Therefore, the statement that entrepreneurs with limited liability put their personal assets at risk is false.

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  • 15. 

    A nonprofit corporation...

    • Provides unlimited liability to its members

    • Provides limited liability to its members

    • Is set up to make profit for its investors

    • Is set up to pay dividends to its shareholders

    Correct Answer
    A. Provides limited liability to its members
    Explanation
    A nonprofit corporation provides limited liability to its members, which means that the personal assets of the members are protected in case of any legal or financial obligations of the corporation. This means that the members are not personally responsible for the debts or liabilities of the organization, and their liability is limited to their investment or contribution to the corporation. This allows individuals to participate in the nonprofit sector without risking their personal finances.

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  • 16. 

    Over the past fifty years the American economy has changed in what way?

    • Manufacturing has replaced retailing as the most dominant industry

    • Service businesses have become far less important to the economy

    • Wholesaling has become the dominant industry in the economy

    • Service and trade businesses have become the dominant industries

    Correct Answer
    A. Service and trade businesses have become the dominant industries
    Explanation
    Over the past fifty years, the American economy has shifted towards service and trade businesses becoming the dominant industries. This means that these sectors have gained more importance and influence in the economy compared to manufacturing, retailing, and wholesaling. This shift can be attributed to various factors such as technological advancements, globalization, and changes in consumer preferences. The growth of service industries like healthcare, finance, and professional services, as well as the expansion of international trade, has contributed to this change in the American economy.

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  • 17. 

    One advantage of a general partnership over a sole proprietorship is a general partnership...

    • Provides limited liability

    • Is a corporation

    • Provides unlimited liability

    • Can rely on more than one person for financial backing

    Correct Answer
    A. Can rely on more than one person for financial backing
    Explanation
    A general partnership can rely on more than one person for financial backing, unlike a sole proprietorship where the business owner is solely responsible for all financial obligations. In a general partnership, multiple partners contribute capital and share the financial responsibilities and risks of the business. This allows for a greater pool of resources and financial support, which can help the partnership to grow and withstand financial challenges more effectively.

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  • 18. 

    Manufacturing is the dominant business type in America today.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    Manufacturing is not the dominant business type in America today. While manufacturing was a prominent industry in the past, the American economy has shifted towards a more service-based economy in recent years. Industries such as technology, finance, healthcare, and entertainment have become increasingly important and have surpassed manufacturing in terms of their contribution to the economy. Therefore, the statement that manufacturing is the dominant business type in America today is false.

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  • 19. 

    The purpose of a cooperative is...

    • To earn profits for management

    • To benefit its member

    • To provide unlimited liability to its members

    • To pay dividends to investors

    Correct Answer
    A. To benefit its member
    Explanation
    A cooperative is an organization that is owned and operated by its members, who are also its customers or users. The primary purpose of a cooperative is to benefit its members by providing them with goods, services, or other benefits that they need or desire. Unlike traditional businesses, cooperatives are not primarily focused on earning profits for management or paying dividends to investors. Instead, their main goal is to serve the interests and meet the needs of their member-owners.

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  • 20. 

    The special permit that allows retailers to purchase goods tax-free from wholesalers and collect sales tax from final buyers is called a ...

    • Reseller's permit

    • Retailing permit

    • Tax permit

    • Wholesale permit

    Correct Answer
    A. Reseller's permit
    Explanation
    A reseller's permit is a special permit that allows retailers to purchase goods tax-free from wholesalers and collect sales tax from final buyers. This permit is specifically designed for businesses that are involved in the resale of goods rather than for personal use. It enables retailers to legally buy goods at wholesale prices without having to pay sales tax, and then charge sales tax to their customers when they sell the goods. This helps to streamline the tax collection process and ensures that the appropriate taxes are paid by the end consumer.

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  • 21. 

    Most business in the United States are...

    • Corporations

    • Partnerships

    • Sole proprietorships

    • Cooperatives

    Correct Answer
    A. Sole proprietorships
    Explanation
    Most businesses in the United States are sole proprietorships because this form of business ownership is the simplest and most common. A sole proprietorship is owned and operated by a single individual, who has complete control over the business and is personally liable for its debts and obligations. This type of business structure is easy to set up and maintain, requiring minimal legal formalities and paperwork. It is also advantageous for small businesses and entrepreneurs who want to retain full control and enjoy the simplicity of operating as a single owner.

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  • 22. 

    Which type of business ownership provides limited liability for the owner(s)?

    • Corporation

    • Sole proprietorship

    • General partnership

    • All of the above

    Correct Answer
    A. Corporation
    Explanation
    A corporation is a type of business ownership that provides limited liability for the owner(s). This means that the owners' personal assets are protected and they are not personally liable for the debts and obligations of the corporation. This is one of the main advantages of forming a corporation, as it separates the legal and financial responsibilities of the owners from those of the business itself.

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  • 23. 

    The business predicted to undergo the most growth in the coming decade are...

    • Primarily service businesses

    • Primarily manufacturing businesses

    • Businesses that convert materials into products

    • Business that sell retail products to wholesalers

    Correct Answer
    A. Primarily service businesses
    Explanation
    The correct answer is primarily service businesses. This is because service businesses are expected to experience significant growth in the coming decade. With advancements in technology and changing consumer preferences, there is an increasing demand for various services such as healthcare, education, consulting, and entertainment. These industries have the potential to expand rapidly and create new job opportunities. On the other hand, manufacturing businesses may face challenges due to automation and outsourcing, while businesses that convert materials into products and sell retail products to wholesalers may also be affected by changing market dynamics.

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Quiz Review Timeline (Updated): Mar 20, 2023 +

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  • Current Version
  • Mar 20, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Dec 10, 2015
    Quiz Created by
    Obinno Coley
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