High School Economics Quiz: Definition of a Firm & Business Types

📚 Quick Study Guide

• 🏢 Definition of a Firm: A firm is an organization that uses resources to produce goods and services for sale.
• 🏭 Goal of a Firm: The primary goal of a firm is usually to maximize profit. Profit is calculated as Total Revenue (TR) minus Total Cost (TC): $\text{Profit} = TR - TC$.
• 💼 Sole Proprietorship: A business owned and run by one person. The owner receives all profits but is also personally liable for all business debts.
• 🤝 Partnership: A business owned and run by two or more people who share in the profits or losses of the business. Partners are usually jointly liable for business debts.
• 🏦 Corporation: A legal entity separate from its owners. It can enter into contracts, own property, and is liable for its debts. Ownership is divided into shares of stock.
• 📈 Types of Corporations: Common types include C corporations, S corporations, and Limited Liability Companies (LLCs).
• 📜 Limited Liability: A key feature of corporations and LLCs, where the owners are not personally liable for the debts of the business.

Practice Quiz

1. Which of the following best defines a firm?
   1. A group of consumers buying goods and services.
   2. An organization that uses resources to produce goods and services for sale.
   3. A government agency regulating business activities.
   4. A charitable organization providing free services.
2. What is the primary goal of most firms?
   1. To maximize employee satisfaction.
   2. To minimize environmental impact.
   3. To maximize profit.
   4. To provide free goods and services.
3. Which business type is owned and run by one person, who is personally liable for all business debts?
   1. Corporation
   2. Partnership
   3. Sole Proprietorship
   4. Limited Liability Company (LLC)
4. In which business type are owners generally NOT personally liable for business debts?
   1. Sole Proprietorship
   2. General Partnership
   3. Corporation
   4. Limited Partnership
5. What is the formula for calculating profit?
   1. Profit = Total Revenue + Total Cost
   2. Profit = Total Revenue - Total Cost
   3. Profit = Total Cost - Total Revenue
   4. Profit = Total Revenue / Total Cost
6. Which of the following is a characteristic of a corporation?
   1. Owners have unlimited liability.
   2. It is not a separate legal entity.
   3. It can enter into contracts.
   4. It cannot own property.
7. What is a key difference between a partnership and a corporation?
   1. Partnerships have limited liability, while corporations have unlimited liability.
   2. Partnerships are owned by shareholders, while corporations are owned by partners.
   3. Corporations are separate legal entities, while partnerships are not.
   4. Partnerships cannot make a profit, while corporations can.