1. A limited liability company is the best form of business for owners who?
A. are concerned about keeping their costs of production at a minimum level.
B. want an outside company to handle all the business's finances.
C. expect to eventually grow their company to compete nationally.
D. wish to reduce their financial responsibility without incorporation.
2. Which of the following may occur as a result of an increase in the price of cell phones?
A. increase in supply
B. increase in quantity supplied
C. decrease in supply
D. decrease in quantity supplied
3. In a specific industry, two dominant firms work together to set prices. We call this
A. competition.
B. collusion.
C. market dominance.
D. market influence.
1. The answer to this question is D. wish to reduce their financial responsibility without incorporation.
To arrive at this answer, we need to understand the characteristics of a limited liability company (LLC) and how it benefits owners.
First, an LLC is a type of business structure that offers the limited liability protection of a corporation while allowing for the pass-through taxation of a partnership or sole proprietorship. This means that owners are not personally responsible for the company's debts or liabilities.
By choosing an LLC, owners can reduce their financial responsibility without going through the more complex process of incorporating. While there may still be costs associated with production, the main benefit of an LLC is the limited liability protection it provides. Therefore, owners who wish to reduce their financial responsibility without incorporation would find an LLC to be the best form of business.
2. The answer to this question is D. decrease in quantity supplied.
To understand why, we need to understand the relationship between price and supply. In general, when the price of a product increases, the quantity supplied by producers tends to decrease. This is because higher prices incentivize producers to supply more of the product, but at the same time, it may also increase the cost of production, making it less profitable to supply the same quantity. As a result, producers may decrease the quantity supplied in response to higher prices.
It is important to note the distinction between supply and quantity supplied. Supply refers to the overall amount of a product that producers are willing and able to sell at various price levels, whereas quantity supplied refers to the specific amount of a product that producers are willing and able to sell at a particular price. In this case, an increase in the price of cell phones would lead to a decrease in the quantity supplied, but it does not necessarily affect the overall supply.
3. The answer to this question is B. collusion.
Collusion refers to an agreement or secret cooperation between two or more firms in the same industry to manipulate prices, reduce competition, and increase their profits. In the given scenario, where two dominant firms work together to set prices, it indicates that they are engaged in collusion.
This behavior is considered anti-competitive and can be illegal in many jurisdictions, as it restricts competition and harms consumers by artificially inflating prices. Competition is the natural state of a market where multiple firms independently compete with each other to attract customers based on price, quality, and other factors. When collusion occurs, it undermines the principles of fair competition.