Economics Unit 3 Test

1) Unlimited liability means that

• shareholders of a company receive dividends only if the company earns a profit.
• the owner of the business bears complete legal responsibility for all debts and damages arising from doing business.
• a business cannot lose more than a preset amount.
• credit can be obtained more easily than in a business that has limited liability.

2) One of the advantages of purchasing a franchise is that the

• franchisee pays a fee and a percentage of the revenues taken in.
• franchisee signs a contract with the franchiser.
• franchiser often provides advertising.
• risk of losing money is small.

3) In the United States, which type of business accounts for the greatest share of revenues?

• sole proprietorship
• partnership
• corporation
• shareholders

4) In a limited partnership

• all partners are equal.
• a bank limits the partnership's liability.
• some partners bear no risk.
• a general partner manages the business.

5) DBQ: Which letter represents the proper location on the diagram for “owners earn dividends”?

• W
• X
• Y
• Z

6) The board of directors of a corporation is responsible for

• running the company’s day-to-day operations.
• hiring officers to run the business.
• determining the price of the company’s shares.
• paying dividends to shareholders.

7) A partnership set up for a specific purpose for a short period of time is known as a

• joint stock company.
• acting board of directors.
• joint venture.
• committee.

8) The most common type of business organization is a

• sole proprietorship.
• joint venture.
• partnership.
• limited partnership.

9) The biggest disadvantage of a sole proprietorship is that

• the proprietor receives all the profits.
• the proprietor has unlimited liability.
• the operation of the business is more complicated.
• business decisions can be made quickly.

10) In a limited partnership, the limited partners

• have an active voice in the management.
• are equal to the general partner.
• only contribute funds or property to the business.
• have unlimited liability for debts.