Which of the following is a characteristic of a corporation but not of a small family-owned business?
A)The corporation buys inputs in markets for the factors of production.
B)The corporation sells output in markets for goods and services.
C)The corporation is guided in its decisions by the objective of profit maximization.
D)The corporation faces a principal-agent problem created by the separation of ownership and control.

Question

Quizplus · Accepted Answer

A small family-owned business is likely to have the owner(s) controlling and managing the business, whereas in a corporation ownership and management are separated. This separation of ownership and control can lead to conflicts of interest and therefore creates a principal-agent problem.

Which of the Following Is a Characteristic of a Corporation