Question 1

Which of the following lists the three types of firms in the United States from smallest to largest in terms of volume of sales?

Accepted Answer

The answer of Which of the following lists the three...

Question 2

Which of the following would be the best example of a sole proprietorship?

Accepted Answer

A sole proprietorship is a business owned and operated by one individual, and a mom and pop restaurant is a common example of this type of business. The other options listed are either partnerships, corporations, or non-profit organizations, which are not sole proprietorships.

Question 3

Which form of business organization is the least common in the United States?

Accepted Answer

The answer of Which form of business organization is the...

Question 4

Messitt and McNulty spend $50, 000 each to form a law partnership.On the first day someone trips over a potted plant in their lobby and sues them for $400, 000.Which of the following is true?

Accepted Answer

In a partnership, each partner is jointly and severally liable for the debts and obligations of the partnership. This means that if McNulty cannot pay, Messitt could be held responsible for the entire $400,000 judgment.

Question 5

The primary reason why individuals are willing to pay entrepreneurs to organize production is

Accepted Answer

Individuals are willing to pay entrepreneurs to organize production because it reduces transaction costs. Entrepreneurs can specialize in coordinating and managing production, which allows businesses to focus on their core competencies and avoid the transaction costs associated with coordinating production themselves. This leads to increased efficiency and profitability for both the entrepreneur and the businesses they work with.

Question 6

A realized capital gain is

Accepted Answer

A realized capital gain is the difference between the selling price and the purchase price of a share of stock. A is incorrect because the broker's fee is not part of the calculation. B is incorrect because it refers to depreciation of equipment, not investments. C is incorrect because it refers to an increase in net worth, not specifically related to investments. D is incorrect because it refers to an increase in market value, which is not necessarily realized until the stock is actually sold.

Question 7

Which of the following would be the best example of a corporation?

Accepted Answer

Microsoft is a large, multinational business entity organized as a corporation, with shareholders who own the company and a board of directors who make major decisions. The other options are not necessarily organized in the same way or at the same scale.

Question 8

Often trade will not occur because

Accepted Answer

Transaction costs refer to the additional costs incurred in the process of buying or selling a good or service, such as transportation costs or legal fees. If these costs are too high, it may not be feasible for trade to occur.

Question 9

The corporate form of business organization

Accepted Answer

The corporate form of business organization provides limited liability to its owners, meaning they are not personally responsible for the company's debts and liabilities beyond their investment in the corporation.

Question 10

Which of the following is most likely to be a partnership?

Accepted Answer

A partnership typically involves two or more individuals who come together to form a business, such as an accounting firm. A and D appear to be sole proprietorships or non-profit organizations, while C and E are large corporations.

Question 11

Owners of corporations are referred to most frequently as

Accepted Answer

Owners of corporations are typically referred to as stockholders or shareholders, as they own shares in the company's stock. Entrepreneurs are individuals who start a business, lien holders have a legal claim to an asset as collateral for a debt, limited partners have limited liability in a partnership, and managers are responsible for overseeing the day-to-day operations of a company but do not necessarily own it.

Question 12

You own stock worth an estimated $1 million in the LPL corporation.In addition, you have personal assets worth another $2 million.LPL becomes insolvent, with debts exceeding assets by $15 million.Your personal wealth will decline by

Accepted Answer

As a stockholder, your maximum loss is limited to the value of your stock in the company, which is $1 million. Your personal assets are separate from the assets of the company and cannot be used to cover its debts. Therefore, your personal wealth will decline by $1 million if LPL becomes insolvent.

Question 13

All of the following are advantages of partnerships except one.Which is the exception?

Accepted Answer

Partnerships do not have limited liability like corporations, which means that each partner is personally liable for the debts and obligations of the business. This is the exception to the advantages listed, as the other options are all true advantages of partnerships.

Question 14

Which of the following is a disadvantage of the corporation compared to the sole proprietorship?

Accepted Answer

The disadvantage of the corporation compared to the sole proprietorship is that the corporate income is taxed twice. The corporation pays taxes on its profits, and then the shareholders pay taxes on the dividends they receive. This can result in a higher overall tax burden compared to the sole proprietorship, where the owner only pays personal income taxes on the business income.

Question 15

Which of the following would be the best example of a partnership?

Accepted Answer

A partnership is a business organization where two or more individuals manage and operate a business in accordance with the terms and objectives set out in a Partnership Deed. The legal office of Alias, Smith, and Jones is likely a law firm operated by partners, making it a classic example of a partnership.

Question 16

Which form of business organization is the most common in the United States?

Accepted Answer

Sole proprietorships are the most common form of business organization in the United States. According to the US Small Business Administration, about 73% of all businesses are owned and operated by a sole proprietor.

Question 17

Stockholders share in the profits of a corporation

Accepted Answer

Stockholders share in the profits of a corporation in proportion to their ownership of stock. The more shares a stockholder owns, the greater their share of the profits will be.

Question 18

In terms of the numbers of firms in the U.S.economy, the most common type of firm is the

Accepted Answer

According to the Small Business Administration, there were 30.7 million small businesses in the United States in 2019, and 73.2% of them were sole proprietorships. Therefore, the most common type of firm in the U.S. economy is a sole proprietorship.

Question 19

Suppose you form a legal partnership with your best friend, and she purchases consulting services calling for a $100, 000 fee.Your business is broke, and you never wanted the consultants to work for you -- only your partner did.For how much of this debt are you legally liable?

Accepted Answer

In a legal partnership, each partner is jointly and severally liable for the debts of the partnership, meaning you are liable for the entire $100,000 debt.

Question 20

Which of the following is true about sole proprietorship in the United States?

Accepted Answer

Sole proprietorship is the most common form of business organization in the United States, accounting for around 73% of all businesses. This is because it is relatively easy and inexpensive to set up and maintain.

Quiz 3: Economic Decision Makers