One of the Major Disadvantages of a Sole Proprietorship Is

question 25

Multiple Choice

One of the major disadvantages of a sole proprietorship is the:

• A)unlimited liability the owner has for the debts of the firm.
• B)possibility of disagreements between owners.
• C)fact that any income earned by this type of business is taxed twice.
• D)high cost of starting or ending the company.

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Definitions:

Marginal Cost

The additional cost incurred from producing one more unit of a good or service.

Profit-Maximizing Seller

An economic agent whose primary objective is to achieve the highest possible profit from their sales.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, used to evaluate the trade-offs in resource allocation.

Accounting Profits

The total revenue of a company minus the explicit costs and expenses directly related to its operations, as shown in its financial statements.