Which of the Following Statements Is CORRECT

question 31

Multiple Choice

Which of the following statements is CORRECT?

• A) One advantage of forming a corporation is that equity investors are usually exposed to less liability than they would be in a partnership.
• B) Corporations face fewer regulations than proprietorships.
• C) One disadvantage of operating a business as a proprietor is that the firm is subject to double taxation,because taxes are levied at both the firm level and the owner level.
• D) It is generally less expensive to form a corporation than a proprietorship because,with a proprietorship,extensive legal documents are required.
• E) If a partnership goes bankrupt,each partner is exposed to liabilities only up to the amount of his or her investment in the business.

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Definitions:

Cartel

An association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition.

Marginal Cost

The increase in total cost that arises from producing an extra unit of output.

Fixed Cost

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance.

Cartel

An agreement among competing firms to control prices or exclude entry of a new competitor in a market, often to maximize their profits illegally or unethically.