In a Market System, Which of the Following Is a Major

question 79

Multiple Choice

In a market system, which of the following is a major benefit of making the firm's owners and investors exclusively shoulder the business risk?

• A)Those who deeply dislike business risk will not have anything to do with the business.
• B)This allows firms to more easily attract labor and other suppliers of inputs.
• C)This reduces the business risk in the economy.
• D)It makes it easier for the government to monitor and manage the business risk.

---

Definitions:

Divisional Segment Margin

A measure of the profitability of a specific division or segment within a company, usually calculated as the division's earnings before interest and taxes divided by its revenues.

Net Operating Income

A company's revenue minus its operating expenses, not including taxes and interest charges.

Common Fixed Expense

Costs that do not change with the level of production or sales within a certain range, and are shared across multiple departments or products.

Variable Costing

A costing method that includes only variable manufacturing costs - direct materials, direct labor, and variable manufacturing overhead - in the cost of goods sold.