Sam, Tom, and Joe Want to Start a Small Business

question 3

Multiple Choice

Sam, Tom, and Joe want to start a small business. Joe will fund the venture but wants to limit his liability to his initial investment and has no interest in the daily operations. Sam will contribute his full efforts on a daily basis but has limited funds to invest in the business. Tom will be involved as an active consultant and manager and will also contribute funds. Sam and Tom are willing to accept liability for the firm's debts as they feel they have nothing to lose by doing so. All three individuals will share in the firm's profits and wish to keep the initial organizational costs of the business to a minimum. Which form of business entity should these individuals adopt?

• A)sole proprietorship
• B)joint stock company
• C)limited partnership
• D)general partnership
• E)corporation

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Definitions:

Price Elasticity

A measure indicating the degree to which product demand is affected by price shifts.

Quantity Supplied

The amount of a good or service that producers are willing and able to sell at a given price over a specified period.

Price Increase

A Price Increase refers to a rise in the cost of goods or services that can occur due to various factors like inflation, increased production costs, or higher demand.

Immediate Market Period

A very short time frame in economics during which the supply of a good is completely fixed and cannot respond to changes in demand.