1 | Page
BAEP 451 MIDTERM Questions and
Correct Answers
Entrepreneurship Definition 1 Ans: Entrepreneurship is the
Pursuit of Opportunity without Regard to Resources Currently
Under Control
Entrepreneurship Definition 2 Ans: Entrepreneurship starts with
the individual entrepreneurs: Who I am, What I know, Whom I
know. Effectuation.
Contribution Margin Ans: REVENUE - VARIABLE COSTS =
CONTRIBUTION MARGIN
Breakeven point Ans: FIXED COST/CONTRIBUTION MARGIN PER
UNIT
Search Fund Ans: Finances expenses during search for a company
to purchase. Becomes equity, typically at a larger than market
value percentage (gatewood and daugherty)
slotting fees Ans: fees manufacturers pay to get shelf space for
their products (salinas and salinas)
Production Cycles: Long vs. Short Ans: Production cycle starts
with the customer and ends up with satisfying the need of the
customer by delivering their required product
© 2025 All rights reserved
, 2 | Page
Long production cycles: Takes a while to develop and produce the
product to satisfy the customer's need (Heather evans)
Service vs. Product Businesses Ans: A product-based business
sells actual physical things, such as clothing or boxes, while a
service-based business sells a service that consumers need, such
as plumbing or consulting (zoots)
Balance Sheet Ans: Assets = Liabilities + Stockholders' Equity
assets financed with either debt or equity, so a balance sheet must
always balance
Where do ideas come from? Ans: New knowledge, customers, lead
users, empathetic design, invention factories/skunkworks, open
market innovation
New knowledge (ideas) Ans: a. Research programs/universities
b. Innovation hubs, government funded projects
c. Long lag times (price point, mass market, $$, testing)
Customers (ideas) Ans: a. Feedback, incremental improvement of
what's already there (not distruptive innovation)
b. Not experts (don't know problem) looking at what is in front of
them
© 2025 All rights reserved
BAEP 451 MIDTERM Questions and
Correct Answers
Entrepreneurship Definition 1 Ans: Entrepreneurship is the
Pursuit of Opportunity without Regard to Resources Currently
Under Control
Entrepreneurship Definition 2 Ans: Entrepreneurship starts with
the individual entrepreneurs: Who I am, What I know, Whom I
know. Effectuation.
Contribution Margin Ans: REVENUE - VARIABLE COSTS =
CONTRIBUTION MARGIN
Breakeven point Ans: FIXED COST/CONTRIBUTION MARGIN PER
UNIT
Search Fund Ans: Finances expenses during search for a company
to purchase. Becomes equity, typically at a larger than market
value percentage (gatewood and daugherty)
slotting fees Ans: fees manufacturers pay to get shelf space for
their products (salinas and salinas)
Production Cycles: Long vs. Short Ans: Production cycle starts
with the customer and ends up with satisfying the need of the
customer by delivering their required product
© 2025 All rights reserved
, 2 | Page
Long production cycles: Takes a while to develop and produce the
product to satisfy the customer's need (Heather evans)
Service vs. Product Businesses Ans: A product-based business
sells actual physical things, such as clothing or boxes, while a
service-based business sells a service that consumers need, such
as plumbing or consulting (zoots)
Balance Sheet Ans: Assets = Liabilities + Stockholders' Equity
assets financed with either debt or equity, so a balance sheet must
always balance
Where do ideas come from? Ans: New knowledge, customers, lead
users, empathetic design, invention factories/skunkworks, open
market innovation
New knowledge (ideas) Ans: a. Research programs/universities
b. Innovation hubs, government funded projects
c. Long lag times (price point, mass market, $$, testing)
Customers (ideas) Ans: a. Feedback, incremental improvement of
what's already there (not distruptive innovation)
b. Not experts (don't know problem) looking at what is in front of
them
© 2025 All rights reserved
