Jeremy is thinking of starting up a small business selling NASCAR memorabilia. He asks his friend, Carmen, if she'd like to join him in setting up a partnership to start the business. What is one disadvantage in joining the partnership that Carmen should
consider?
A) Carmen should realize that profits in the partnership will be reduced by dividend payments to shareholders.
B) Carmen should realize that, as an owner of the business, she will be personally responsible for the debts of the business.
C) Carmen should realize that the profits of the business will also be taxed as dividend income, so she faces the potential for double taxation of that business income.
D) Carmen should realize that the Jeremy will have complete control over the business because it was his idea.
Answer: B
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Higher prices and price increases combined with lower real output and income, resulting from a major increase in input prices in the economy is called:
A) deflation. B) inflation. C) stagflation. D) none of the above.
Price elasticity of demand basically measures
A) the reliability of a product. B) the responsiveness of consumers to price changes. C) the variability of price changes. D) the percentage change in market price as a result of a change in demand.