Unit 1 Text Questions
Review Questions
1. How does the GDP help determine the economic health of a nation?
The GDP helps determine the economic health of the a nation by predicting the status of a specific
country’s economy. It represents the entire dollar value of all the goods and services produced in a
country over a set period of time.
2. Why are small businesses an important part of the American economy?
Most jobs in the United States come from small business in a variety of different departments and
fields. More than 95% percent of people in our country work for a small business. This shows how
valuable this type of business is to our nation.
3. What is the difference between an entrepreneur and entrepreneurship?
Entrepreneurs are the people who actually invent a good or service while entrepreneurship is
the study of the innovation or an organization.
4. Why would someone choose to remain a non-employer?
Being a non-employer means that you are able to choose your own schedule and manage your
appointments/hours that you work in a given day. You are always able to change this number
in order to fit your current needs.
5. What is the difference between a sole proprietorship and an LLC?
A sole proprietorship is a type of business in which one person is in control of everything. They
control the products created and the prices at which they’ll sell them at. On the other hand, a
LLC corporation protects the business owner when things begin to go down hill. This type of
corporation is separate from a person’s personal finances.
Critical Thinking Questions
1. Alfonso had hoped to be a professional artist. Painting is his medium, and he specializes in large
canvases. While his art is quite rewarding and he is beginning to build a reputation as an artist,
it is not paying his bills. He has decided that he would like to open a small business. List three
potential businesses that would allow him to turn his passion for art and painting into
something more profitable.
Alfonso could create an online business to sell his art, become a painter for new homes, or
teach art to a class of high school students.
2. Even when economic indicators show that the economy is down, small businesses often thrive.
Think of a small business in your community that would do well, even if people did not have a
lot of extra money to spend, and explain the advantages it has over larger businesses.
The Farmer’s Market would do quiet well because it’s composed of many small business. While
each small business may not make a ton of money at the actual Farmer’s Market, they are able
to get their brand out into the world and eventually sell more goods in stores. A small business
is able to change strategies much more efficiently than a larger business and it can be easier to
market if your product is more unique.
3. As discussed in the unit, there are several different ways to start a business, and each has its
own risks. Create a scenario in which an entrepreneur started one of the given types of
businesses (sole proprietorship, partnership, corporation, or LLC) and failed to prepare for the
risks involved. In other words, describe a situation in which an entrepreneur has problems due
to the specific type of business created. Your scenario should be approximately as long as the
one in Question 1 in this section.
Michael started a snow blowing business. A couple weeks into the season, he had a friend
cover for him for the day and he didn’t empty the blower. When Michael went back to use the
blower, it shot out all the snow back onto the driveway and he was fired from the job.
4. Of the different reasons given that people choose to become entrepreneurs (following a
passion, filling a need, running a better business, and inventing a new product), which do you
think is most likely to lead to a successful business? Justify your choice.
I believe that following a passion that someone has is the key to success. That person is going
to be more willing to push through hardships and difficulties with a product that they feel
passionate about. In the long run, this will make them a more successful entrepreneur.
5. A florist who has been in business for several years finds himself facing several problems
simultaneously. First, he has a large order for a wedding in three days and just found out that,
due to an unexpected frost, the tulips the bride was adamant had to be in the bouquets are not
going to be available. Second, his top employee has informed him that she has to schedule a
surgery in two weeks and has to take the following six weeks off. Then he heard a rumor that
the building where he rents his shop is for sale, meaning he may have a new landlord and
higher rent. Finally, the largest refrigerator in his store is making funny noises, and he suspects
it will soon stop working. If this happens, he may lose inventory. Prioritize the problems
described by putting the most immediate problem first and the least pressing last. Explain the
order you chose. Then suggest actions that could be taken to address the problems.
1. Refrigerator making noise – If the refrigerator stops working, he will lose all of his inventory and
that would make his life miserable. The florist can hire a technician or engineer to take a look at
the refrigerator to try to find the problem.
2. Large order for a wedding in three days and the tulips are unavailable – This is a very time
sensitive issue and the people organizing the wedding will want what they ordered. The florist
can try to look for an alternative source for the flowers at a different location than where he’s
looked already.
3. Employee needs 6 weeks off – Since the wedding is in three days, the employee would not be
off work yet. The florist could try to hire a part time employee to help him to keep up with
demand and pacing of his business.
4. Rumors – This is not very important since rumors aren’t always true. While this could hurt the
business, it would be wise to check with the administration to see if this rumor is a reality. If it’s
true, the florist may need to move locations.
