Why were joint-stock companies created?

• A. To enable governments to directly control all trade
• B. To eliminate competition in the marketplace
• C. To prevent the formation of monopolies
• D. To allow investors to pool resources and share risks in large business ventures

Answer: (D)

Verified step by step guidance

1. Understand the historical context: Joint-stock companies emerged during times when large-scale business ventures, such as overseas trade and colonization, required substantial capital investment beyond the means of individual investors.
2. Recognize the problem faced by early investors: Large ventures were risky and expensive, making it difficult for a single person to finance and manage the entire operation alone.
3. Identify the solution provided by joint-stock companies: They allowed multiple investors to pool their financial resources together, sharing both the potential profits and the risks involved in the venture.
4. Note the benefit of shared risk: By distributing the financial risk among many shareholders, joint-stock companies made it more feasible to undertake large projects that would otherwise be too risky or costly for individuals.
5. Conclude that joint-stock companies were not created to control trade directly, eliminate competition, or prevent monopolies, but primarily to enable collective investment and risk-sharing in large business enterprises.