Which of the following is a characteristic of a sole proprietorship?
Show model answer
C) Unlimited liability for the owner A sole proprietorship has a single owner who bears unlimited liability, while the other options describe characteristics of partnerships or corporations.
What is the main advantage of a private limited company?
Show model answer
B) Easier to raise capital than a sole proprietorship A private limited company has limited liability for shareholders and can raise capital more easily than a sole proprietorship, but its shares cannot be freely traded like those of a public limited company.
Which of the following is an example of a horizontal merger?
Show model answer
B) A soft drink company acquiring a bottled water company A horizontal merger involves two firms in the same industry, such as two beverage companies.
What is a potential benefit of a vertical merger?
Show model answer
B) Reduced competition from suppliers A vertical merger can help a firm secure its supply chain and reduce competition from suppliers, while also potentially lowering costs.
Which of the following is an example of an internal economy of scale?
Show model answer
B) Improved production efficiency due to learning An internal economy of scale arises from improvements within the firm, such as learning and specialization, while the other options involve external factors or mergers.
What is a diseconomy of scale?
Show model answer
B) An increase in average costs as output increases A diseconomy of scale occurs when a firm becomes too large and inefficient, leading to increased average costs.
Which of the following is a characteristic of a franchise?
Show model answer
B) The franchisee pays a fee to use the franchisor's brand and business model A franchise involves a franchisee paying fees and royalties to the franchisor for the right to use their brand and business model.
What is the main purpose of a conglomerate merger?
Show model answer
B) To diversify into unrelated industries A conglomerate merger involves two firms from unrelated industries, allowing for diversification and risk reduction.
Which of the following is an example of an external economy of scale?
Show model answer
C) A cluster of firms in an industry leading to better infrastructure An external economy of scale arises from factors outside the firm, such as improved infrastructure due to a cluster of firms in an industry.
What is a potential disadvantage of a public limited company?
Show model answer
C) Increased regulatory requirements and scrutiny A public limited company must comply with more regulations and faces increased scrutiny from shareholders and the public, which can be a disadvantage.
Which of the following is a characteristic of a co-operative?
Show model answer
A) Owned by a group of people who work together for a common purpose A co-operative is owned and controlled by its members, who work together for a common purpose, such as providing goods or services to each other.
What is a potential benefit of a merger?
Show model answer
B) Greater economies of scale A merger can help firms achieve greater economies of scale, leading to lower average costs and increased competitiveness.
Which of the following is an example of a synergy gained from a merger?
Show model answer
B) Improved management and coordination A synergy gained from a merger refers to the improved performance that results from better management, coordination, and utilization of resources.
What is a potential cause of diseconomies of scale?
Show model answer
B) Increased bureaucracy and coordination problems Diseconomies of scale can arise from increased bureaucracy, communication difficulties, and a loss of managerial control as a firm grows too large.
Which of the following is a characteristic of a joint venture?
Show model answer
A) A temporary partnership between two firms to achieve a specific goal A joint venture is a temporary partnership between two firms, allowing them to share resources and expertise to achieve a specific goal while remaining separate entities.