1. The reasons for involving more than one person in ownership or operation of a business entity do not include: a. The ability to shift risks to third persons. b. The ability to diversify risks. c. The ability to achieve economies of scale. d. All of the above are reasons to involve more than one person. 2. “Agency cost” means: a. The commission that is paid an agent for obtaining a contract. b. The pay due to one’s employees. c. The costs to the principal associated with an agent’s motive to serve him or herself. d. Profit-sharing or other arrangements to align an agent’s motives with those of his or her principal. 3. “Limited liability” means: a. That an investor cannot lose his or her investment. b. That an investor cannot lose more than his or her investment. c. That an investor can lose his or her investment and may be responsible for a designated percentage or amount in excess of his or her investment. d. That an investor must refrain from active management in order to limit his or her risk of loss to the amount of his or her investment. 4. Which of the following would not be resolved as a matter of the law of business organizations? a. The obligations of corporate officers to the corporation. b. The obligations of partners to one another. c. The obligations of the corporation to avoid violating various laws of general applicability. d. The obligations agents owe principals. 5. A lawyer representing an entity such as a corporation: a. Also represents its owners. b. Also represents its managers. c. Both answer a and answer b. d. Neither answer a nor answer b.
1. The reasons for involving more than one person in ownership or operation of a business entity do not include:
a. The ability to shift risks to third persons.
b. The ability to diversify risks.
c. The ability to achieve economies of scale.
d. All of the above are reasons to involve more than one person.
2. “Agency cost” means:
a. The commission that is paid an agent for obtaining a contract.
b. The pay due to one’s employees.
c. The costs to the principal associated with an agent’s motive to serve him or herself.
d. Profit-sharing or other arrangements to align an agent’s motives with those of his or her principal.
3. “Limited liability” means:
a. That an investor cannot lose his or her investment.
b. That an investor cannot lose more than his or her investment.
c. That an investor can lose his or her investment and may be responsible for a designated percentage or amount in excess of his or her investment.
d. That an investor must refrain from active management in order to limit his or her risk of loss to the amount of his or her investment.
4. Which of the following would not be resolved as a matter of the law of business organizations?
a. The obligations of corporate officers to the corporation.
b. The obligations of partners to one another.
c. The obligations of the corporation to avoid violating various laws of general applicability.
d. The obligations agents owe principals.
5. A lawyer representing an entity such as a corporation:
a. Also represents its owners.
b. Also represents its managers.
c. Both answer a and answer b.
d. Neither answer a nor answer b.
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