Advanced Placement (AP) World History Practice Exam 2026 - Free AP World History Practice Questions and Study Guide

Joint-stock companies are defined as businesses that are formed to share investment risk and profits among multiple shareholders. This structure allowed individuals to invest in trade and exploration ventures with a limited amount of capital, reducing individual risk while enabling enterprises to raise substantial sums for large projects, such as overseas trade and colonization. By pooling resources, investors could spread the risk of potential losses over many participants, making it more feasible to undertake significant financial ventures.

The other options do not accurately capture the essence of joint-stock companies. For instance, operating without investments contradicts the fundamental principle of these companies since investment is crucial for their formation and function. While some joint-stock companies may have focused on specific sectors like agriculture, this was not their defining characteristic. Lastly, the idea that they do not allow public investment misses the point, as many joint-stock companies were designed specifically to allow investment from multiple shareholders, including the public.