When the Owner Runs the Business

question 107

Multiple Choice

When the owner runs the business:

• A) he does not bear the full cost of a bad decision.
• B) there is not a principal-agent problem.
• C) he does not receive the full benefit nor the full cost of any decision.
• D) he has only limited liability for the actions of the business.

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Definitions:

Government Expenditure

Government Expenditure includes all government consumption, investment, and transfer payments, such as spending on infrastructure, welfare programs, and public services.

Output

The total amount of goods and services produced by an economy, company, or sector.

Short-Run Aggregate Supply

The total supply of goods and services that firms in an economy want to sell at a given price level in the short term.

Spending Multiplier

A concept in economics that represents how changes in autonomous spending lead to changes in total economic output.