ESB V.2 Practice Tests

A law passed increasing the minimum wage by 30%. The owner of a small landscaping business must now pay all of her laborers 30% wages. What is the minimum amount the owner must now charge customers for labor to balance her increased operational expenses?

• 60%

• 30%

• No increase is needed

• 15%

Answer explanation

The owner must charge customers 30% more for labor to balance the increased operational expenses due to the 30% increase in minimum wage for laborers.

Which of these is a characteristics of a successful entrepreneur mindset?

• Likes to argue

• Lives in a dreamworld

• Makes friends quickly

• Doesn't give easily

Answer explanation

The correct characteristic of a successful entrepreneur mindset is that they don't give up easily, showing resilience and determination.

You need to create a legal structure for your small business. You have plans for it to grow and hope in the future to sell shares to the public. Your startup partners are citizens of Mexico and Japan. You do not want to be personally responsible for business liabilities. 

• Limited Liability Company

• S-Corporation

• C-Corporation

• Sole Proprietorship

Answer explanation

A C-Corporation is the best choice as it allows for growth, selling shares publicly, and limits personal liability. It can have foreign partners and provides the desired liability protection.

The owner of a landscaping business has noticed that none of his competitors are including ponds or other water features in the gardens they create. The landscaper wants to determine the viability of this business opportunity.What should this entrepreneur do FIRST before offering to design and build water features as part of his landscaping business?

• Contact the water department to see if they can support the extra demand for water.

• Ask the customers in the area if they are interested in adding a water feature to their gardens.

• Determine if there is a supply chain available.

• Perform a financial audit to determine if there is enough money available to add the new service.

Answer explanation

The entrepreneur should ask the customers in the area if they are interested in adding a water feature to their gardens to determine the demand before offering the new service.

You need to create a legal structure for your small business. You would like some of the benefits enjoyed by large corporations, but do not want to be taxed twice. You have four partners who will be shareholders. None of you plan to sell your ownership shares to the public, but do want to be protected from business liabilities, Which legal structure should you set up for your business?

• Sole Proprietorship

• C-Corporation

• Limited Liability Company

• S- Corporation

Answer explanation

An S-Corporation provides limited liability protection like a C-Corporation but avoids double taxation by passing income through to shareholders. It is suitable for small businesses with a few shareholders.

A ________ employee receives a set amount of pay each month without overtime compensation for extra hours worked.

• Piece work

• Salary

• Hourly

• Commission

Answer explanation

A salary employee receives a set amount of pay each month without overtime compensation for extra hours worked, making it the correct choice.

Which is one of the greatest risks of being an entrepreneur?

• Damage to reputation

• Financial instability

• No control over schedule

• Loss of experience

Answer explanation

Financial instability is one of the greatest risks of being an entrepreneur as it can lead to business failure and personal financial struggles.

You operate a small insurance office with a partner.Which expense is a fixed cost?

• Cost of paper supplies

• Property lease for the office

• Water bill for an office

• Paycheck for an hourly administrative assistant

Answer explanation

The fixed cost is the property lease for the office because it remains constant regardless of the level of business activity.

What is a target market?

• Marketing with a bullseye goal.

• Sales to customers who use archery products.

• Customers to whom a company wants to sell its products and services.

• Advertising based on bullet points.

Answer explanation

A target market refers to customers to whom a company wants to sell its products and services, making it the correct choice.

Which of the following is an example of primary data?

• A list of your business competitors compiled by the Chamber of Commerce

• Information collected from a poll of your company Facebook followers

• An series of industry reports

• The United States Census

Answer explanation

Primary data refers to information collected directly from the source, such as through surveys or polls. Therefore, information collected from a poll of your company Facebook followers is an example of primary data.