Explain the difference between financing investment with a business loan versus with venture capital. What are the pros and cons of each?
What will be an ideal response?
Financing with a loan involves accepting an obligation to repay a debt. Financing with venture capital involves accepting funds in exchange for a portion of ownership of the company. With a loan a business owner retains control of her company but must generate enough profit to cover operating costs and loan payments. This may not be possible for a new company. With venture capital there is no obligation to repay the funds. However, a business owner must forfeit some profits and control of her company to the venture capitalist.
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The usefulness of money in commercial societies comes from the fact that
A) money is backed by gold. B) most people will change their behavior at least a little in response to money incentives. C) most people will do anything at all for money. D) most people would rather spend money than save it. E) the quantity of money can easily be expanded or contracted.
In the short run, producers derive surplus from market exchange because
a. total revenue is greater than the minimum they would require to sell the good b. total revenue is equal to the minimum amount they would require to sell the good c. total revenue is less than the minimum amount they would require to sell the good d. marginal revenue equals average revenue e. they can rob consumers of most of their consumer surplus