Which of the following is a disadvantage of the corporate form of business in the context of monopoly markets?

• A. Difficulty in raising capital
• B. Lack of legal recognition as a separate entity
• C. Potential for reduced competition leading to higher prices for consumers
• D. Unlimited liability for shareholders

Answer: (C)

Verified step by step guidance

1. Understand the characteristics of the corporate form of business: it is a legal entity separate from its owners, has limited liability for shareholders, and generally has easier access to capital markets.
2. Analyze each option in the context of a monopoly market: 'Difficulty in raising capital' is usually not a disadvantage for corporations, as they can issue stocks and bonds to raise funds.
3. Consider 'Lack of legal recognition as a separate entity': corporations are legally recognized as separate entities, so this is not a disadvantage.
4. Evaluate 'Unlimited liability for shareholders': corporations provide limited liability, meaning shareholders are not personally liable beyond their investment, so this is incorrect.
5. Recognize that 'Potential for reduced competition leading to higher prices for consumers' is a disadvantage related to monopoly power, which can arise when a corporation dominates the market, reducing competition and potentially harming consumers.