Micro Asia College of Science and Technology, Inc.

Iba, Zambales

MICROECONOMICS
Final Examination

INSTRUCTION: Handwritten only 😊

Part I. Multiple Choice (2 points each, right minus wrong, no erasure)

1. Which of these is not an advantage of sole proprietorship?

a. Financial operations are not complicated
b. Easy to organize
c. Has unlimited liability
d. Owner acquires all the profits
e. All of the above

2. Which of these advantages of partnership does not belong to the group?

a. Possibility of conflict and quarrels in the business
b. Has a limited life
c. Has unlimited liability
d. Net income is subject to tax whether distributed or not
e. None of the above

3. Which of these is not a disadvantage of sole proprietorship?

a. Lacks stability
b. Limited ability to raise capital
c. Limited ability to expand the business
d. Business is entirely a responsibility of the owner
e. None of the above

4. Which of these advantages of corporation does not belong to the group?

a. Centralized management
b. Most efficient management
c. Has limited liability
d. Has a legal capacity
e. None of the above

5. Among these disadvantages of a corporation, which does not belong to the group?
a. Complicated and not easy to organize
b. Higher income tax rate
c. Has limited powers
d. May be subject to abuses of corporate officials
 6. An association of at least two persons who agree to place their money, property or industry in a
common fund, with the aim of sharing profits among themselves.
a. Partnership
b. Sole proprietorship
c. Corporation
d. Small and medium enterprises
e. None of the above

7. A business organization in which the owners are called stockholders.

a. Partnership
b. Sole proprietorship
c. Corporation
d. Small and medium enterprises
e. None of the above

8. One important advantage of this business is limited liability.

a. Partnership
b. Sole proprietorship
c. Corporation
d. Small and medium enterprises
e. None of the above

9. What is the main purpose of business?

a. To create customers
b. To create goods
c. To earn profit
d. To create services
e. All of the above

10. Business creates __________ in the economy.

a. Investments
b. Employment
c. Production
d. Income
e. All of the above

Part II. Essay (10 points each)

1. Given a chance to have a business, what type of business organization fits your capacity and
personality. Why did you say so?
2. What do you think are the current innovations of business sector? Discuss.
3. Do you think it might be efficient for an industry to be monopolistically competitive rather than
perfectly competitive?
4. Discuss the characteristics of externality and give a scenario to illustrate the condition.
Part III. Analysis of the Situation (10 pts)

A taxi driver who does not own the taxi is very harsh on his driving as he knows that the car is not
his. What kind of market failure is this? How does this market failure arise?