Author Question: Refer to Figure 7-1. The market equilibrium price is A) 30. B) 25. C) 20. D) (Read 67 times)

colton · **on:** Jun 29, 2018

Refer to Figure 7-1. The market equilibrium price is

A) 30. B) 25. C) 20. D) <20.

Question 2

What are the three types of firms? Explain the major advantages and disadvantages of each.

What will be an ideal response?

bobsmith · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

C

Answer to Question 2

The three main ways of organizing a firm have both advantages and disadvantages:
Proprietorship. ADVANTAGESeasy to set up; managerial decision-making is simple and rapid; and profits are taxed only once. DISADVANTAGESbad decisions on the part of the owner are not subject to review; the owner's entire wealth is at stake because of unlimited liability; the firm dies with the owner; and acquiring capital and labor is expensive.
Partnership. ADVANTAGESeasy to set up; has diversified decision-making so that more than one person's expertise can be utilized; can survive the death or withdrawal of a partner; and profits are taxed only once. DISADVANTAGESall the owners' wealth is at risk because of unlimited liability; if there are many partners, gaining a consensus about managerial decisions may be difficult; the withdrawal of partner may create capital shortage; labor costs are high compared to corporations; and capital costs can be high.
Corporation. ADVANTAGESperpetual life; limited liability for its owners; readily available, large-scale, and low-cost capital; can rely on professional managers rather than the talents of the owners; and reduced costs from long-term labor contracts. DISADVANTAGESpotent ially complex management structure may lead to slow and expensive decision-making; and profits are taxed twice, once as corporate profit and once as income to the stockholders.