Which of the Following Statements Is Correct

question 15

Multiple Choice

Which of the following statements is correct?

• A)Other things held constant, it is generally safer to invest money in a proprietorship than in a corporation.
• B)There really is no difference between a general partnership and a corporation, because both have multiple owners and both offer limited liability to the owners.
• C)If you are planning to start a business, which you will run as the sole employee, and if you expect the business to earn $1,000,000 per year before taxes, you always can minimize the total taxes you pay by setting up the business as a corporation.
• D)According to the text, "agency problems" tend to increase when managers own larger relative amounts of the company's stock.
• E)Maximizing the income statement item "net income" might not be the best goal for a corporation if the managers are interested in maximizing the economic welfare of the firm's stockholders (that is, the firm's stock price).

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Definitions:

Sophisticated Quantity Theory

An advanced approach to Quantity Theory of Money, considering complex factors influencing money supply and demand.

Deflation

A decline in the price level for at least two years.

Keynesians

Economists and thinkers following the theories of John Maynard Keynes, who advocate for active government intervention in the economy to manage demand and avoid economic recessions.

Capitalism

An economic system in which most economic decisions are made by private owners and most of the means of production are privately owned.