Suppose Two Owners of a Store Agree to Split the Profit

question 86

Multiple Choice

Suppose two owners of a store agree to split the profit equally regardless of the number of hours each spends working at the store.As a result,

• A) production efficiency is achieved.
• B) each enjoys only half the marginal benefit of an additional hour working in the store.
• C) one will work all of the time while the other works zero hours.
• D) each will work as many hours as if he or she were the sole owner.

---

Definitions:

Administrative Expenses

Overhead or general expenses related to the day-to-day running of a business, not directly tied to production.

Market Prices

The prevailing price for goods or services in a competitive marketplace, determined by supply and demand.

Capital Structure

The composition of a firm's financing through a mix of debt, equity, and other financial instruments, affecting its risk and valuation.

Dividend Payout Ratios

The fraction of earnings paid to shareholders in dividends, usually expressed as a percentage.