Question 1

The owner or owners control the day-to-day activities of which of the following types of business?

Accepted Answer

In partnerships and sole proprietorships, the owner or owners are directly involved in the day-to-day operations and decisions of the business. Corporations, on the other hand, are managed by a board of directors and officers, not directly by the owners (shareholders).

Question 2

In a partnership,the owners of the business and the business are ________,and in a sole proprietorship,the owner of the business and the business are ________.

Accepted Answer

In a partnership and a sole proprietorship, the owners and the business are not considered separate legal entities. This means the owners are personally liable for the debts and obligations of the business.

Question 3

As a form of business,a sole proprietorship

Accepted Answer

Sole proprietorships are not able to issue stock as they are owned and operated by a single individual.

Question 4

The typical firm in many industries has become ________ over the past 100 years,and efficiently organizing production has become ________.

Accepted Answer

The correct answer is A because over the past 100 years, the typical firm in many industries has become larger and efficiently organizing production has become more difficult.

Question 5

A sole proprietorship is limited to how many owners?

Accepted Answer

A sole proprietorship is owned and operated by one individual, hence the name "sole" proprietorship. There cannot be more than one owner in a sole proprietorship.

Question 6

Assume you and your best friend set up a partnership and your lawyer tells you that as the owners,you could each stand to lose your personal wealth if the business goes bankrupt.This means a partnership

Accepted Answer

If the lawyer says that as owners, you both could stand to lose your personal wealth if the business goes bankrupt, it means that a partnership faces unlimited liability. This is because partners of a partnership are personally responsible for the debts and obligations of the business. Therefore, if the business cannot pay its debts, the personal assets of the partners could be used to cover the liabilities.

Question 7

Which of the following is an advantage of starting a new business as a partnership?

Accepted Answer

Partnerships generally face fewer government rules and regulations compared to corporations, making them simpler and less costly to operate in terms of compliance.

Question 8

Juliana,Gabrielle,and Marcela want to start a business they are the only owners and the company does not issue stock.The type of business they want to start is a

Accepted Answer

Since Juliana, Gabrielle, and Marcela want to start a business together as the only owners, the best choice for them would be a partnership. A sole proprietorship involves a single individual owning and running the business, while a corporation can issue stocks and has a more complex structure, which may not be necessary for a small business like theirs. Therefore, a partnership would be the most appropriate and suitable choice for them.

Question 9

________ of people work at firms that have 50 or more employees.

Accepted Answer

According to the Small Business Administration, more than 70 percent of people work at firms that have 50 or more employees.

Question 10

What does unlimited liability mean?

Accepted Answer

Unlimited liability means that the owners of the business are personally responsible for paying expenses incurred by the business. This means that if the business cannot pay its debts, the owners may be held personally liable and may have to use their personal assets to cover the debts.

Question 11

Arturo wants to start a business where he is the chief executive officer and the company does issue stock.The type of business Arturo wants to start is a

Accepted Answer

A corporation is the only type of business that issues stock and has a CEO. A sole proprietorship and partnership do not issue stock and have owners instead of a CEO.

Question 12

How do a partnership and a corporation differ?

Accepted Answer

All the options listed are correct differences between partnerships and corporations. Partnerships do have unlimited liability, meaning partners can be personally liable for business debts, while corporations offer limited liability protection to their owners. Corporations can issue stocks and bonds to raise capital, a mechanism not available to partnerships. Additionally, corporations are subject to corporate taxes, potentially leading to double taxation (once at the corporate level and again on dividends), whereas partnerships enjoy pass-through taxation, avoiding this issue.

Question 13

Public companies ________ and private companies ________.

Accepted Answer

Public companies sell stock in financial markets to raise capital and are subject to regulatory oversight, while private companies do not sell stock in financial markets and are privately owned.

Question 14

According to the textbook,which of the following must a firm in a market economy do today to succeed?

Accepted Answer

To succeed in a market economy, a firm must produce new or better goods or services to stay competitive and maintain market share. The firm must also efficiently organize production to keep costs low and maximize profits. Finally, to stay competitive, a firm must produce existing goods and services at a lower cost than its competitors. Therefore, all of these options (A, B, and C) are necessary for a firm to succeed in a market economy.

Question 15

A partnership is limited to how many owners?

Accepted Answer

There is no set limit to the number of owners in a partnership. Partnerships can have any number of owners as long as they meet the legal requirements and abide by the rules and regulations set forth by their state.

Question 16

A sole proprietorship is the type of business that has ________ government rules and regulations affecting it.

Accepted Answer

Sole proprietorships are subject to fewer government rules and regulations compared to other business structures, such as corporations or partnerships, because they are owned and operated by a single individual and are not considered separate legal entities.

Question 17

Damian wants to start a business where he is the only owner and the company does not issue stock.The type of business Damian wants to start is a

Accepted Answer

A sole proprietorship is a type of business where the owner has complete control and ownership of the business. Unlike a partnership or corporation, there are no partners or shareholders to share profits or control the business decisions. Therefore, Damian's desire to be the only owner and not issue stock makes a sole proprietorship the best choice for his business.

Question 18

In a typical year,new small firms create ________ jobs.

Accepted Answer

According to data from the Small Business Administration, new small firms (less than one year old) create an average of 3.3 million jobs in a typical year. Therefore, choice D is the correct answer.

Question 19

A corporation is limited to how many owners?

Accepted Answer

There is no limit to the number of owners in a corporation. This means that a corporation can have an unlimited number of shareholders who can own the corporation's stock.

Question 20

A ________ is owned by its stockholders.

Accepted Answer

Only corporations are owned by stockholders. Sole proprietorships are owned by a single individual, and partnerships are owned by two or more individuals who may or may not have invested equal amounts of money.

Quiz 6: Firms, the Stock Market, and Corporate Governance