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ECON CH-8 BUSINESS MODELS PART A

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Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 1. 

Your running shoes were designed in the United States but assembled in Asia by a company called RunnerPro. RunnerPro is a
a.
multinational corporation.
c.
producer cooperative.
b.
general partnership.
d.
trade association.
 

 2. 

Why is it easier for a partnership to borrow money and to hold good employees than it is for a sole proprietorship to do so?
a.
The more limited access to a partner’s personal funds make the business more careful.
b.
The large number of partners makes it more likely that the business will be a success.
c.
The larger number of partners means that people are easier to get along with.
d.
A partnership has more personal stability and access to more money.
 

 3. 

In a publicly held corporation
a.
a large number of stockholders can buy and sell stock.
b.
family members are excluded from holding stock.
c.
stocks are not usually traded at stock exchanges.
d.
stockholders rarely trade their stocks.
 

 4. 

Your family’s house needs a new roof. In order to find out which roofers are reliable and charge fair prices, your family should call your local
a.
service cooperative.
c.
business franchise.
b.
Better Business Bureau.
d.
labor union.
 

 5. 

If a general partnership fails, who is responsible for the debts?
a.
anyone who works for the partnership
b.
no one
c.
only the most senior general partner
d.
all of the partners
 

 6. 

Which of the following represents the percentage of all U.S. businesses that are corporations, and the percentage of all goods that those corporations sell?
a.
50 percent of businesses; 75 percent of goods sold
b.
20 percent of businesses; 90 percent of goods sold
c.
20 percent of businesses; 50 percent of goods sold
d.
10 percent of businesses; 50 percent of goods sold
 

 7. 

A joining of two or more businesses that are involved in different stages of producing the same good or service is called which of the following?
a.
vertical merger
c.
cooperative
b.
conglomeration
d.
horizontal merger
 

 8. 

Every day on your way to basketball practice you wave to Mr. Martin, who owns the neighborhood flower stand. Mr. Martin’s store is probably a
a.
small corporation.
c.
sole proprietorship.
b.
limited partnership.
d.
parent company.
 

 9. 

Your uncle owns a convenience store that has branches nationwide. His store is an example of a
a.
multinational.
c.
professional organization.
b.
business franchise.
d.
consumer cooperative.
 

 10. 

You own a successful bicycle repair business. You are considering incorporating in order to
a.
acquire greater control in managing the business.
b.
raise money more easily.
c.
avoid government regulations.
d.
avoid double taxation.
 

 11. 

Which of the following is a business organization owned by a group of people for their mutual benefit?
a.
a labor union
c.
a professional organization
b.
a cooperative
d.
a limited liability partnership
 

 12. 

If a general partnership fails, who is responsible for the debts?
a.
only the most senior general partner
b.
all of the partners
c.
no one
d.
anyone who works for the partnership
 

 13. 

Which of the following is a disadvantage of a sole proprietorship?
a.
lack of permanence
c.
legal constraints
b.
difficult to start up
d.
high taxes
 

 14. 

You are part-owner of NewBrands corporation because you
a.
own the company’s stock.
b.
attend the company’s annual meetings.
c.
have created a corporate charter for the company.
d.
have purchased company bonds.
 

 15. 

You are looking for a job with many fringe benefits. You therefore probably want to work for a
a.
corporation.
c.
nonprofit organization.
b.
general partnership.
d.
sole proprietorship.
 

 16. 

What are the money and other valuables that belong to a corporation or partnership called?
a.
assets
c.
liabilities
b.
liens
d.
ownership
 

 17. 

You decide to go to a consumer cooperative to buy supplies for your class party. Prices are cheaper there mainly because consumer cooperatives
a.
help members sell their products.
b.
make large purchases.
c.
require members to work 20 hours a month.
d.
charge annual membership fees.
 

 18. 

Which of the following is an advantage of a sole proprietorship?
a.
No one is responsible if it fails.
b.
It is the least-regulated form of business organization.
c.
It is an easy way to make a lot of money.
d.
It is easy to get financing to start one.
 

 19. 

Corporations are defined as “entities” because they
a.
may merge in various ways.
b.
sell about 90 percent of the products sold in the United States.
c.
require a certificate of corporation.
d.
have a legal identity separate from those of their owners.
 

 20. 

What percentage of businesses are sole proprietorships?
a.
25 percent
c.
75 percent
b.
40 percent
d.
60 percent
 

 21. 

What is a fringe benefit?
a.
a business other than sales or marketing
b.
an accounting term meaning profits
c.
a cash payment for casual work
d.
a payment other than wages or salaries
 

 22. 

Good Wireless and Better Wireless merge to form Best Wireless. The federal government watches this merger carefully for evidence of a
a.
monopoly.
c.
conglomerate.
b.
vertical merger.
d.
horizontal merger.
 

 23. 

Ellen started a catering business, but soon decided that catering was too stressful for her. She could close her business relatively easily and return to school because the business was a
a.
producer cooperative.
c.
general partnership.
b.
closely held corporation.
d.
sole proprietorship.
 

 24. 

Dr. Ruiz shares equal responsibility and liability with her colleagues in their medical practice. Her practice is a
a.
general partnership.
c.
sole proprietorship.
b.
limited partnership.
d.
limited liability partnership.
 

 25. 

What is the major difference between a corporation and other kinds of businesses?
a.
A corporation has officers who are responsible for the business.
b.
A corporation has a separate entity apart from that of the owners and workers.
c.
A corporation is not responsible for its debts if it fails.
d.
A corporation is much larger than other kinds of businesses.
 

 26. 

What are royalties?
a.
a percentage of a franchise’s earnings paid to the parent company
b.
fees paid to celebrities for using their names
c.
fees paid to law firms and accountants
d.
a percentage of profits paid to the government
 

 27. 

The family-owned Italian restaurant in your neighborhood is probably an example of a
a.
general partnership.
c.
franchise.
b.
multinational corporation.
d.
consumer cooperative.
 

 28. 

What are organizations that are in the business of benefiting society and operate like a business called?
a.
limited partnerships
c.
trade associations
b.
producer cooperatives
d.
nonprofit organizations
 

 29. 

The government usually allows conglomerates because they
a.
join two or more firms that compete in the same market.
b.
lead to larger, more efficient firms.
c.
do not result in decreased competition.
d.
combine firms that are involved in different stages of producing the same good or service.
 

Matching
 
 
Identifying Key Terms
Match each term with the correct statement below.
a.
general partnership
f.
royalties
b.
dividend
g.
producer cooperative
c.
zoning law
h.
liability
d.
stock
i.
business license
e.
horizontal merger
j.
nonprofit organization
 

 30. 

authorization to start a business issued by the local government
 

 31. 

an institution that functions like a business but does not operate in order to generate profits
 

 32. 

regulation in a city or town that designates separate areas for residency and business
 

 33. 

a business in which the owners share equally in both responsibility and liability
 

 34. 

the legally bound obligation to pay debts
 

 35. 

the portion of corporate profits paid out to stockholders
 

 36. 

a share representing a portion of ownership in a corporation
 

 37. 

the joining of two or more firms competing in the same market with the same good or service
 
 
Identifying Key Terms
Match each term with the correct statement below.
a.
assets
f.
professional association
b.
business organization
g.
business license
c.
trade association
h.
corporation
d.
limited partnership
i.
cooperative
e.
sole proprietorship
j.
bond
 

 38. 

a certificate issued by a corporation promising to repay a loan with interest to the buyer
 

 39. 

an establishment formed to carry on commercial enterprise
 

 40. 

nonprofit association that promotes the interests of a particular industry
 

 41. 

a business organization owned and operated by a group of individuals for their mutual benefit
 

 42. 

a business owned and managed by a single individual
 

 43. 

money and other valuables belonging to an individual or business
 

 44. 

an establishment owned by two or more persons in which only one person has unlimited personal liability for the business
 

 45. 

a legal entity owned by individual stockholders
 



 
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