The Order of Difficulty and Expense, from Most to Least

question 67

Multiple Choice

The order of difficulty and expense, from most to least, when forming a business organisation is as follows:

• A) corporation, sole traders, partnership.
• B) corporation, partnership, sole traders.
• C) partnership, corporation, sole trader.
• D) partnership, sole trader, partnership.
• E) sole trader, partnership, corporation.

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Definitions:

Implicit Costs

The opportunity costs that are not directly incurred but represent the loss of alternative benefits when choosing one option over another.

Explicit Costs

Direct, out-of-pocket payments for goods and services required to run a business.

Accounting Profit

Sales minus explicit cost. Implicit costs are not considered.

Perfect Competition

A market structure characterized by many buyers and sellers, homogeneous products, free entry and exit, and perfect information, where no single entity can influence market prices.