A Disadvantage of a Partnership Is That of 'Mutual Agency

question 59

Multiple Choice

A disadvantage of a partnership is that of 'mutual agency' which means:

• A) each partner has limited liability for the debts incurred on a contract entered into by any other partner.
• B) each partner must contribute the same capital and skills to the partnership.
• C) each partner has the right to enter into contracts on behalf of the partnership.
• D) only the partner with the highest cash contribution has the right to enter into contracts on behalf of the partnership.

---

Definitions:

Average Total Cost

The total cost of production (fixed plus variable costs) divided by the quantity of output produced, representing the average cost per unit of output.

Marginal Cost

The amount spent on producing an incremental unit of a product or service.

Output

Refers to the amount of product or service produced within a given period by a firm, industry, or country.

Fixed Costs

Expenses that do not change with the level of production or business activity, such as rent, salaries, and utility charges.