Unit 3 Test Review

Front

Which type of business structure is easiest to establish? Options: B-Corp, C-Corp, LLC

Back

Sole proprietorship

Answer explanation

A sole proprietorship is the simplest business structure to establish, requiring minimal paperwork and no formal registration, making it the easiest option compared to B-Corps, C-Corps, and LLCs.

Front

What is a disadvantage of starting a sole proprietorship?

Back

You are personally liable

Answer explanation

A disadvantage of starting a sole proprietorship is that you are personally liable for all debts and obligations of the business. This means your personal assets could be at risk if the business incurs debt or legal issues.

Front

Which type of business is the most profitable, and why? Options: Corporations - because they can raise large amounts of capital and scale more effectively. Partnerships - because they share costs and responsibilities among partners. Sole proprietorships - because they are owned by one person who keeps all the profits. Sole proprietorships - because they have lower tax rates than other business types.

Back

Corporations - because they can raise large amounts of capital and scale more effectively.

Answer explanation

Corporations are often the most profitable because they can raise significant capital and scale operations effectively, allowing for greater market reach and efficiency compared to other business types.

Front

What is a disadvantage of a corporation?

Back

Must pay personal income tax AND business income tax

Answer explanation

A disadvantage of a corporation is that it must pay both personal income tax on dividends received by shareholders and business income tax on its profits, leading to double taxation.

Front

In which type of business organization do the owners have limited liability, meaning they are not personally responsible for the company's debts beyond their investment? Options: Sole proprietorship, Partnership, Cooperative, Corporation

Back

Corporation

Answer explanation

In a corporation, owners (shareholders) have limited liability, meaning they are only responsible for the company's debts up to their investment. This protects personal assets, unlike sole proprietorships or partnerships.

Front

What type of business organization is Soofi's Savvy Seashells if the owner faces unlimited personal liability for the business's debts and legal obligations? Options: Partnership, Limited Liability Company (LLC), Corporation, Sole Proprietorship

Back

Sole Proprietorship

Answer explanation

Soofi's Savvy Seashells is a Sole Proprietorship because it is owned by a single person who faces unlimited personal liability for the business's debts and legal obligations.

Front

Which type of business organization is the hardest, yet most profitable to establish? Options: General Partnership, Limited Partnership, Corporation, Sole proprietorship

Back

Corporation

Answer explanation

Establishing a corporation is complex due to regulatory requirements and formalities, making it the hardest type of business organization to set up. However, it offers limited liability and greater potential for profit, making it the most profitable.

Front

What does "Supply and Demand of Labor" refer to?

Back

The relationship between the availability of workers and job openings

Answer explanation

"Supply and Demand of Labor" refers to the relationship between the availability of workers and job openings. It highlights how the number of available workers affects job opportunities and wage levels.

Front

What kind of a profession typically earns lower wages due to high competition? Options: Unskilled worker, Skilled worker, Semi-skilled worker, Professional worker

Back

Unskilled worker

Answer explanation

Unskilled workers typically earn lower wages due to high competition in their field. Many individuals can perform these jobs, leading to an oversupply of labor and downward pressure on wages.

Front

Why do unskilled laborers generally earn less than skilled or professional laborers?

Back

Because their jobs require fewer skills and are more easily replaceable.

Answer explanation

Unskilled laborers earn less because their jobs require fewer skills and are more easily replaceable, leading to lower wages compared to skilled or professional laborers who possess specialized training and expertise.