Question 1

In which business structure are the risks and rewards shared by two or more owners?

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  limited liability company 
A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  limited liability company B

Question 2

A _____ is owned by one person.

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  limited liability company 
D)  corporation 
A)  sole proprietorship 
B)  partnership 
C)  limited liability company 
D)  corporation A

Question 3

The most common legal structure is:

Accepted Answer

A)  sole proprietorship. 
B)  partnership. 
C)  limited liability company. 
D)  corporation. 
A)  sole proprietorship. 
B)  partnership. 
C)  limited liability company. 
D)  corporation. A

Question 4

Ramon and Ralph are both attorneys and have decided to open the Ramon and Ralph Law firm. They do not want to incorporate but they do want to limit their liability. What business structure will they choose?

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  limited liability company 
D)  franchise 
A)  sole proprietorship 
B)  partnership 
C)  limited liability company 
D)  franchise

Question 5

XYZ Corporation needs to raise money for an expansion into a new market. The company decides to borrow the money in the financial market. What does XYX likely do?

Accepted Answer

A)  sell new shares of stock 
B)  issue new bonds 
C)  trade existing shares of stock 
D)  trade existing bonds 
A)  sell new shares of stock 
B)  issue new bonds 
C)  trade existing shares of stock 
D)  trade existing bonds

Question 6

A _____ is a separate entity with the rights of an individual.

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  dual partnership 
D)  corporation 
A)  sole proprietorship 
B)  partnership 
C)  dual partnership 
D)  corporation

Question 7

_____ is when a firm acquires products or services from another firm.

Accepted Answer

A)  Diversification 
B)  Outsourcing 
C)  Increase in production capacity 
D)  Insourcing 
A)  Diversification 
B)  Outsourcing 
C)  Increase in production capacity 
D)  Insourcing

Question 8

Which of the following would probably cause a business's retained earnings to increase?

Accepted Answer

A)  stock buybacks 
B)  the payment of dividends 
C)  an increase in profits 
D)  a decrease in profits 
A)  stock buybacks 
B)  the payment of dividends 
C)  an increase in profits 
D)  a decrease in profits

Question 9

One method that businesses use to overcome the principal-agent problem is to:

Accepted Answer

A)  not require the board of directors to oversee management. 
B)  reward executives and managers who make poor decisions. 
C)  not give stock options to management. 
D)  give employees a stake in the business. 
A)  not require the board of directors to oversee management. 
B)  reward executives and managers who make poor decisions. 
C)  not give stock options to management. 
D)  give employees a stake in the business.

Question 10

_____ is when one party in a transaction knows more than another.

Accepted Answer

A)  The principal-agent problem 
B)  Rational self-interest 
C)  Asymmetric information 
D)  Skin-in-the-game 
A)  The principal-agent problem 
B)  Rational self-interest 
C)  Asymmetric information 
D)  Skin-in-the-game

Question 11

When a firm expands into a country with highly competitive markets, it may be attempting to:

Accepted Answer

A)  avoid management issues. 
B)  increase country risk. 
C)  increase sales to reach production capacity. 
D)  reduce debt. 
A)  avoid management issues. 
B)  increase country risk. 
C)  increase sales to reach production capacity. 
D)  reduce debt.

Question 12

A disadvantage of a sole proprietorship is that:

Accepted Answer

A)  profits are taxed twice. 
B)  profits are taxed only once. 
C)  issuing stocks is expensive. 
D)  the owner has unlimited legal liability. 
A)  profits are taxed twice. 
B)  profits are taxed only once. 
C)  issuing stocks is expensive. 
D)  the owner has unlimited legal liability.

Question 13

Discuss three advantages of globalization.

Accepted Answer

Answers will vary, but advantages of glo

Question 14

XYZ Corporation needs to raise money for an expansion into a new market. The company does not want to borrow the money, so it will most likely:

Accepted Answer

A)  sell new shares of stock. 
B)  issue new bonds. 
C)  trade existing shares of stock. 
D)  trade existing bonds. 
A)  sell new shares of stock. 
B)  issue new bonds. 
C)  trade existing shares of stock. 
D)  trade existing bonds.

Question 15

_____ risk can be reduced when a firm both produces and sells its products in the same country.

Accepted Answer

A)  Diversification 
B)  Currency 
C)  Production capacity 
D)  Country 
A)  Diversification 
B)  Currency 
C)  Production capacity 
D)  Country

Question 16

Which of the following are sold in the financial markets?

Accepted Answer

A)  dividends 
B)  bonds 
C)  retained earnings 
D)  buybacks 
A)  dividends 
B)  bonds 
C)  retained earnings 
D)  buybacks

Question 17

A _____ is a business that exists as a separate entity from its owners.

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  limited liability company 
D)  corporation 
A)  sole proprietorship 
B)  partnership 
C)  limited liability company 
D)  corporation

Question 18

_____ risk is the probability that changes in exchange rates affect the value of a firm and its financial obligations.

Accepted Answer

A)  Currency 
B)  Foreign 
C)  Domestic 
D)  Country 
A)  Currency 
B)  Foreign 
C)  Domestic 
D)  Country

Question 19

Mandy wants to open a sewing alterations business. She will be working from home and will not incorporate. What is her business structure?

Accepted Answer

A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  franchise 
A)  sole proprietorship 
B)  partnership 
C)  corporation 
D)  franchise

Question 20

An advantage of global expansion may be:

Accepted Answer

A)  management issues. 
B)  lower product quality. 
C)  diversification of consumer markets. 
D)  increased debt. 
A)  management issues. 
B)  lower product quality. 
C)  diversification of consumer markets. 
D)  increased debt.

Exam 9: Organizing a Business

In which business structure are the risks and rewards shared by two or more owners?

A _____ is owned by one person.

The most common legal structure is:

Ramon and Ralph are both attorneys and have decided to open the Ramon and Ralph Law firm. They do not want to incorporate but they do want to limit their liability. What business structure will they choose?

XYZ Corporation needs to raise money for an expansion into a new market. The company decides to borrow the money in the financial market. What does XYX likely do?

A _____ is a separate entity with the rights of an individual.

_____ is when a firm acquires products or services from another firm.

Which of the following would probably cause a business's retained earnings to increase?

One method that businesses use to overcome the principal-agent problem is to:

_____ is when one party in a transaction knows more than another.

When a firm expands into a country with highly competitive markets, it may be attempting to:

A disadvantage of a sole proprietorship is that:

Discuss three advantages of globalization.

XYZ Corporation needs to raise money for an expansion into a new market. The company does not want to borrow the money, so it will most likely:

_____ risk can be reduced when a firm both produces and sells its products in the same country.

Which of the following are sold in the financial markets?

A _____ is a business that exists as a separate entity from its owners.

_____ risk is the probability that changes in exchange rates affect the value of a firm and its financial obligations.

Mandy wants to open a sewing alterations business. She will be working from home and will not incorporate. What is her business structure?

An advantage of global expansion may be:

The Basics of Economics

Why We Trade

The Supply and Demand Model

Elasticity

Consumer Choice

The Economic Efficiency of Markets

Taxation: An Economic Analysis

Externalities, the Environment, and Public Goods

Stocks and Bonds

The Cost of Doing Business

Perfect Competition

Monopoly and Antitrust Laws

Monopolistic Competition and Price Discrimination

Oligopoly

Behavioral Economics and Strategy

Labor and Other Resources

The Distribution of Income

Information and Health Economics

GDP and the Price Level

Unemployment and the Business Cycle

Long Run Economic Growth

Saving, Investment, and the Federal Budget Deficit

The Monetary System

Money and the Price Level in the Long Run

Aggregate Supply and Aggregate Demand

Monetary Policy and Interest Rates

Fiscal Policy and the Business Cycle

The Aggregate Expenditure Model

Inflation Expectations and Stabilization Policies

International Trade

Foreign Exchange Markets

International Finance

Filters