Question

A nonprofit organization does not issue stock shares or distribute its extra funds to owners or shareholders. If all businesses were required to operate as nonprofit organizations, how might that hurt a free market economy? People would be less likely to buy goods and services in they thought a company could not issue stock. Business owners would be less likely to invest in their businesses if they could not personally profit from them. People would be less likely to buy goods and services if they thought that the owners or shareholders could not profit. Nonprofit organizations

Answer 1

The correct answer is: "Business owners would be less likely to invest in their businesses if they could not personally profit from them".

Investments consist on directing a certain amount of money to the purchase of an asset or a right, expecting to receive that money back together with a retribution. For example, business owners bring money to a corporation by buying stock, expecting to either receive dividend payments or to resell that ownership title for a higher price that the price paid for it.

In conclusion, economic agents (such as business owners) are only willing to invest in exchange for a retribution. If they do not offer so to potential investors, it would be very difficult for corporations to pool the enough amount of funds to undertake their economic activity.

Answer 2

"Business owners would be less likely to invest in their businesses if they could not personally profit from them" is the best option from the list, since if profit incentives are taken away there is really no financial reason for someone to invest in a firm.