George, an Ophthalmologist, Owns a Separate Business (Not Real Estate)

question 10

Multiple Choice

George, an ophthalmologist, owns a separate business (not real estate) in which he participates. He has one employee who works part-time in the business. Which of the following statements is correct?

• A) If George participates for 500 hours and the employee participates for 520 hours during the year, George qualifies as a material participant.
• B) If George participates for 600 hours and the employee participates for 1,000 hours during the year, George qualifies as a material participant.
• C) If George participates for 120 hours and the employee participates for 120 hours during the year, George does not qualify as a material participant.
• D) If George participates for 95 hours and the employee participates for 5 hours during the year, George probably does not qualify as a material participant.
• E) None of the above.

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Definitions:

Price Floor

A government-imposed minimum price charged on goods and services, typically above equilibrium price to prevent market prices from dropping too low.

Consumer Surplus

The difference in the amount consumers would ideally pay for a service or good versus what they really spend.

Producer Surplus

The imbalance between the desired compensation by producers for a good or service and the real income they secure.

Binding Price Ceiling

A government-imposed limit on the price of a commodity or service that is set below the market equilibrium price, causing a shortage.