Economics Questions and Answers

Wholesalers either take title to the goods they purchase, or they own the goods they purchase. If there is a significant change in the value of the products between the time of the purchase from the producer and the sale to the retailer, the wholesaler will absorb that profit or loss.

Joint stock company is a company whose stock is owned jointly by the shareholders.

In the event that a joint stock company declares bankruptcy, the company's shareholders may be entitled to a portion of the liquidated assets, depending on which shares they hold and how much liquid assets are left over. Upon bankruptcy, a firm will be required to sell all of its assets and pay off all debts.

The directors could not dictate the decisions in the company as the rights in decision making process also vest in the hands of shareholders.  Thus democracy is maintained well. 

A firm will choose to implement a shutdown of production when the revenue received from the sale of the goods or services produced cannot even cover the variable costs of production. In that situation, the firm will experience a higher loss when it produces, compared to not producing at all.

Technically, shutdown occurs if average revenue is below average variable cost at the profit-maximizing positive level of output. 

Economies of Scale refer to the cost advantage enjoyed by a firm when it increases its level of output. An increase in the level of output indicates the growth and expansion of a firm. This happens when costs are spread over a larger number of goods.