an american restaurant owner convinces several friends to help him pay the costs to open a second location…
an american restaurant owner convinces several friends to help him pay the costs to open a second location. if the new restaurant succeeds, the owner and his friends will share the profits. if it fails, however, all of them will split the losses. this situation is most similar to which of the following?\na. the expansion of the consumer market\nb. the regulation of businesses under mercantilism\nc. the changing of prices according to supply and demand\nd. the creation of a joint stock company
Answer
Brief Explanations:
A joint - stock company is an entity where multiple people invest capital, share profits if successful, and bear losses if it fails. In the given situation, the restaurant owner and his friends are pooling their resources (similar to investing capital in a joint - stock company), sharing profits (if the restaurant succeeds), and sharing losses (if it fails). The expansion of the consumer market (A) is about increasing the number of consumers, which is not relevant here. Mercantilism (B) is about government - regulated trade for national wealth, not this private investment scenario. Changing prices according to supply and demand (C) is an economic principle about price determination, not about investment and profit - loss sharing among a group like in the question.
Answer:
D. The creation of a joint stock company