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Chapter 8 Economics Review

A zoning law is a(n)
law in a city or town that designates separate areas for residency and for business.
What percentage of total sales in the United States are generated by sole proprietorships?
6 Percent
What is one of the first decisions an entrepreneur must make?
what kind of business organization will best serve his or her interests
Which of the following is an advantage to owning your own business?
You can respond quickly to changes in the marketplace.
An establishment formed to carry on commercial enterprise is called a
business organization
Which of the following is required to start up a sole proprietorship type of business?
You are exempt from your city’s zoning laws.
Which of the following is a disadvantage of owning a sole proprietorship?
You can lose all your personal property if your business fails.
Payment other than wages or salaries is a(n)
fringe benefit.
The legally bound obligation to pay debts is known as a
An authorization to start a business issued by the local government is a
business license
Joe is an accountant and plans to join a group of accountants. He compares a group in a general partnership with a group in a limited liability partnership. He finds the limited liability partnership has one advantage he’s particularly interested in. What is it?
Joe would not be liable if another partner were to make a mistake.
If business partners fail to establish articles of partnership,
they will fall under the Uniform Partnership Act.
Most partnerships take in receipts amounting to
under $25,000.
Which of the following is known as a partnership agreement?
articles of partnership
Assets are
money and other valuables belonging to an individual or business.
What is a partnership in which partners share equally in both responsibility and liability?
a general partnership
A partnership in which only one partner is required to
limited partnership
What percentage of businesses in the United States are partnerships?
7 percent
Which of the following statements is FALSE?
A sole proprietorship is a type of limited partnership.
A partnership in which ALL partners are limited partners is a
limited liability partnership (LLP).
Who manages a corporation?
board of directors and managers
A conglomerate is
a business combination merging more than three businesses that make unrelated products.
The license to form a corporation issued by state government is a
certificate of incorporation.
Which of the following statements is FALSE?
A multinational company pays taxes only in the country in which it is headquartered.
Why does the government carefully monitor horizontal mergers?
The resulting single firm might gain monopoly power in its market.
A formal contract to repay borrowed money with interest at fixed intervals is a
The portion of corporate profits paid out to stockholders is
a dividend.
Which of the following is an example of a vertical merger?
two companies, one producing engines, and the other producing engine parts
What is the Securities and Exchange Commission (SEC)?
a federal agency that regulates the stock market
A vertical merger is
the combination of two or more firms involved in different stages of producing the same good or service.
Which of the following is a disadvantage faced by a franchise business owner that would not be encountered by an independent business owner?
franchising fees and royalties
A franchise owner’s share of earnings given as a payment to a parent company is called
a royalty
Which of the following is NOT an example of a professional organization?
The American Red Cross
What kind of organization is the Better Business Bureau?
business assosiation
An agricultural marketing cooperative that helps members sell their products is a
producer cooperative.
Which of the following is NOT an example of a nonprofit organization?
A fast food franchise
An institution that functions much like a business, but does not operate for the purpose of generating profits is a
nonprofit organization
A semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a given area is called a
business franchise.
A nonprofit organization that promotes the interests of a particular industry is a
trade assosiation
Which of the following is NOT a kind of cooperative?
nonprofit cooperative

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