Econ Unit 3 Test

Pop Quiz! What's a cool perk of running a sole proprietorship?

• C. It's a guaranteed gold mine.

• a. It magically avoids failure.

Answer explanation

The correct choice is C. It's a guaranteed gold mine because running a sole proprietorship allows for full control over the business and all profits go directly to the owner.

Can you guess what percentage of businesses are flying solo as sole proprietorships?

• b. 40 percent

• d. 75 percent

Answer explanation

The correct answer is d. 75 percent, as the majority of businesses operate as sole proprietorships.

Imagine a general partnership hits a rough patch and ends up failing. Who do you think is left holding the bag for the debts?

• b. all of the partners

• d. no one

Answer explanation

In a general partnership, all partners are personally liable for the debts of the business. Therefore, if the partnership fails, all partners are left holding the bag for the debts.

What's the cool term for when two or more companies that are involved in different stages of making the same awesome product or service decide to join forces?

• a. vertical merger

• b. horizontal merger

Answer explanation

A vertical merger is when two or more companies in different stages of making a product or service join forces, unlike a horizontal merger where companies in the same stage merge.

Why does a dynamic duo (partnership) find it a breeze to secure loans and attract top talent compared to a lone wolf (sole proprietorship)?

• d. A partnership has more personal stability and access to more money.

• a. The more limited access to a partner's personal funds make the business more careful.

Answer explanation

A partnership offers more personal stability and access to more money, making it easier to secure loans and attract top talent compared to a sole proprietorship.

What's the standout feature of a corporation compared to other business types?

• A corporation is like a giant among businesses in size.

• A corporation is its own 'person'—separate from the owners and employees.

Answer explanation

A corporation is its own 'person'—separate from the owners and employees.

Dive into the world of business! What exactly are royalties?

• a. fees paid to law firms and accountants

• b. a percentage of earnings paid for a franchise

Answer explanation

Royalties are a percentage of earnings paid for a franchise, making option b the correct choice.

Pop Quiz Time! Can you guess which of these options correctly represents the chunk of U.S. businesses and the massive amount of goods they sell?

• b. 20 percent of businesses; 90 percent of goods sold

• C. 50 percent of businesses; 75 percent of goods sold

Answer explanation

The correct choice is b. 20 percent of businesses; 90 percent of goods sold, as it accurately represents the distribution of businesses and goods in the U.S.

What's a fringe benefit? Think outside the cash box!

• b. a business other than sales or marketing

• C. a payment other than wages or salaries

Answer explanation

A fringe benefit is a payment other than wages or salaries, such as healthcare, retirement plans, or company cars.

Pop Quiz Time! 🎉 Which of the following do you think is a bit of a bummer about running a business all by yourself (a.k.a. sole proprietorship)? 🤔

• a. It might not stick around forever (lack of permanence)

• d. It's a mountain to start up

Answer explanation

The correct choice is 'a. It might not stick around forever (lack of permanence)' because as a sole proprietorship, the business is not a separate legal entity and may cease to exist if the owner passes away or decides to close the business.