Which of the Following Statements Is CORRECT

question 9

Multiple Choice

Which of the following statements is CORRECT?

• A) Corporations face few regulations and more favorable tax treatment than do proprietorships and partnerships.
• B) Managers who face the threat of hostile takeovers are less likely to pursue policies that maximize shareholder value compared to managers who do not face the threat of hostile takeovers.
• C) Bond covenants are an effective way to resolve conflicts between shareholders and managers.
• D) Because of their simplified organization,it is easier for proprietors and partnerships to raise large amounts of outside capital than it is for corporations.
• E) One advantage to forming a corporation is that the owners of the firm have limited liability.

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Definitions:

Pure Exchange Economy

An economic model where agents trade existing goods without the production of new goods, focusing on the allocation and distribution of resources.

Utility Function

A mathematical representation that ranks the preference level of different bundles of goods, showing satisfaction or happiness derived from consumption.

Numeraire

A standard unit of account or measuring stick in economics used to compare the value of various goods or services.

Utility Function

A mathematical tool used in economics to represent a consumer's preference ranking of different bundles of goods.