Chapter 5 Twenty-six years ago, several small vineyard owners in California joined voluntarily to market their grapes and wine in an attempt to get better prices

281. (p. 141) A ___________ is an organization that is owned and controlled by the people who use it—producers,

consumers and workers with similar needs who pool their resources for mutual gain.

282. (p. 141) In rural areas electrical power is often sold by ____________ that take advantage of the government’s

policy to sell them electricity at wholesale rates.

A. franchises

283. (p. 141) Some __________ ask members/customers to work at the organization for a number of hours a

month as part of their duties.

284. (p. 141) The purpose of a farm cooperative is to:

D. allow socialism a foothold in the U.S.

285. (p. 141) In a cooperative, members/customers:

D. take turns serving on the board that manages the company.

286. (p. 141) People who form cooperatives:

D. want to find a way to supply basic necessities free of charge to everyone.

287. (p. 141) A distinguishing feature of a cooperative is that it:

A. maintains a distinct separation between ownership and management.

288. (p. 141-142) Which of the following statements about farm cooperatives is most accurate? Farm cooperatives

have:

D. increased in number, but decreased in size in recent years.

289. (p. 141) Which of the following people would be most interested in participating in a business organized as a

cooperative?

D. Jennifer prefers to work for a charitable organization that emphasizes helping people who are less fortunate

than she is.

290. (p. 141) Twenty-six years ago, several small vineyard owners in California joined voluntarily to market their

grapes and wine in an attempt to get better prices. Over the years they expanded the organization to include

other services such as buying and selling farm supplies and equipment and providing financial and technical

services. The arrangement established by these vineyard owners is an example of a(n):

A. closed corporation.

291. Although most new firms start out as sole proprietorships, few large firms are organized this way. Why is

the sole proprietorship such a popular form of ownership for new firms? What features of the sole

proprietorship make it unattractive to growing firms?

292. What is the difference between a general partner and a limited partner? Give an example of a situation in

which a person would want to be a limited partner.

293. What is a C corporation? What are the major advantages and disadvantages of this form of business

ownership?

294. What is a limited liability company (LLC)? How does it compare to an S corporation? What are the major

advantages and disadvantages of an LLC?

295. Corporate mergers are classified into three types. What are the three types, and how do they differ? Give

an example of each type.

296. Franchising has certainly become a key component of the U.S. economy. What are the major advantages

and disadvantages of franchising?

297. (p. 118) Currently, the AutoMotion Garage is operated as a(n):

A. limited liability company.

298. (p. 121) Gina asked Al if he would be interested in joining the business as an owner. She proposed that she

continue to provide the technical expertise and deal directly with customers, while Al, who has a college degree

in finance, handles many of the financial aspects of running AutoMotion. In addition, Gina wants Al to

contribute some much-needed money for expansion. Under Gina’s proposal, she and Al would operate the

business together as:

D. business consultants.

299. (p. 121) Although Lew is impressed with AutoMotion and believes it could be a place to invest some money,

he has told Gina that he does not have the time or knowledge to take an active role in management, nor does he

want accept the risk of unlimited liability. Lew could involve himself as a:

D. junior partner.

300. (p. 130) When Gina told Al that she ultimately wanted to expand even further, he suggested that they explore

the possibility of forming a(n) ____________, which has very flexible ownership rules and would give them

more choice in how the company’s earnings are taxed while still protecting all owners from high levels of risk.

A. foreign corporation

301. (p. 134) Al also suggested another way Gina could finance her expansion. He described how Gina could set

up a chain of AutoMotion Repair Shops by selling the rights to use AutoMotion’s name, garage design and

service ideas to investors who would pay Gina an initial fee and annual royalties based on earnings. Evidently,

Al is suggesting that Gina set up a:

D. master limited partnership.

c5 Summary