Which of the Following Statements Is CORRECT

question 7

Multiple Choice

Which of the following statements is CORRECT?

• A) If a corporation elects to be taxed as an S corporation,then both it and its stockholders can avoid all Federal taxes.This provision was put into the Federal Tax Code in order to encourage the formation of small businesses.
• B) The more capital a firm is likely to require,the smaller the probability that it will be organized as a corporation.
• C) It is generally easier to transfer one's ownership interest in a partnership than in a corporation.
• D) One danger of starting a proprietorship is that you may be exposed to personal liability if the business goes bankrupt.This problem would be avoided if you formed a corporation to operate the business.
• E) Corporate shareholders are exposed to unlimited liability,but this factor is offset by the tax advantages of incorporation.

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Definitions:

Elasticities

Indicators that show the sensitivity of the demand or supply of a product to variations in its price, income levels, or other relevant elements.

Elasticity of Demand

A measure of how much the quantity demanded of a good or service changes in response to a change in its price.

Determinant

A factor or element that causes change in an outcome or condition, often used in reference to variables that affect economic indicators.

Cross Elasticity

A measure of how the quantity demanded of one good responds to a change in the price of another good.