Economics UNIT 3 TEST
What are Business Associations?
An organization that brings together business owners from a specific area, demographic, or market
What are Professional Organizations?
An organization/association designed to advance a particular profession, support those working in said profession, and serve the public good
What is a Strike?
An organized work stoppage intended to force an employer to address union demands
What is a Business Organization?
An ownership structure of a company or firm
What is the Glass ceiling?
An unofficial barrier that sometimes prevents some women and minorities from advancing to the top rank of organizations dominated by men.
The market structure in which firms are "price takers" is called ..?
Perfect (pure) Competition
What is one outcome of collusion?
Price Fixing
What is the primary characteristic of purely competitive markets?
that they are efficient
What happens if a firm controls a large share of a market?
the Federal Trade Commission and the Department of Justice's Antitrust Division will watch the firm closely to ensure that it does not unfairly force out its competitors.
What is "Market Power"?
the ability of a company to control prices and total market output
Dividends-
the distribution of some of a company's earnings to a class of its shareholders, as determined by the company's board of directors. Dividends are payments made by publicly-listed companies as a reward to investors for putting their money into the venture.
What is Price Discrimination?
the division of consumers into groups based on how much they will pay for a good
What are "Start-Up Costs"?
the expenses a new business must pay before it can begin to produce and sell goods
Limited Liability Partnership-
* A form of partnership that allows professionals to enjoy the tax benefits of a partnership while limiting their personal liability for the malpractice of other partners.; multiple partners involved in the business * Partnership providing protection against liability for wrongful conduct of other partners; all partners can enjoy limited liability
Advantages of Multi-corporations:
* Benefit consumers and workers- provide jobs and products around the world *Jobs provided help ppl in poorer nations enjoy better living standards *Spread new technologies and production methods across globe
Corporate mergers:
* Corporations may also grow by merging, or combining, with another corporation - horizontal mergers: a merger or business consolidation that occurs between firms that operate in the same industry - vertical mergers: a merger between two or more companies involved at different stages in the supply chain process for a common good or service
What are the Disadvantages of Incorporation?
* Difficulty and Expense of Start-Up *Double Taxation *Loss of Control *More Regulation not recent inventions
What are the advantages of Sole Proprietorships?
* Easy to Start and End --> the main advantage of sole proprietorship. * Relatively Few Regulations * Sole Receiver of Profit --> Owner gets to keep all profits after paying income taxes * Full Control --> Can run their businesses as they wish. Must still follow laws.
Advantages of Nonprofits:
* Employees cannot be held personally reliable for any debts a nonprofit organization experiences *Nonprofits don't pay taxes *The board members are usually volunteers * Nonprofits qualify for government grants
What are the Advantages of Franchises?
* Franchise comes with built in reputation * Management training and support - franchisers help owners gain the experience they need to succeed by running training and support programs * Standardized quality - most parent companies require franchise owners to follow certain rules and processes to guarantee product quality; high-quality products attract customers * National advertising programs - parent companies pay for advertising campaigns to establish their brand names. These ads can increase sales for each franchisee * Financial assistance - some franchisers provide financing to help franchise owners start their businesses; This aid can help people with fewer resources enjoy the economic right of becoming business owners * Centralized buying power - franchisers buy materials in bulk for all of their franchise locations. They pass on the savings to their franchisees
What are the Characteristics of Corporations?
* Has many workers (can produce and sell goods on a large scale) *Have the capital to build factories and hire workers * People can buy stock in the company, making each stockholder a partial owner of the corporation *Have a legal identity separate from the identities of its owners *May engage in business, make contracts, sue other parties or be sued by others, and pay taxes. *In the US, corporations amount for about 20% of all businesses but more than 80% of sales.
Publicly Held Corporations-
* Have many shareholders who can buy or sell stock on the open market *Stocks are bought and sold in financial markets called stock exchanges - New York Stock Exchange and Tokyo Stock Exchange
What are the common Barriers to Entry?
* High Start-Up Costs * Complex Technology
What are the Disadvantages of Franchises?
* High franchising fees and royalties - Buying into a franchise carries significant economic responsibilities. Franchisers often charge high fees for the right to use the company name. They also charge franchise owners a share of their earnings, or royalties * Strict operating standards - Franchise owners have the responsibility to follow all the rules laid out in the franchising agreement for such matters as hours of operation, employee dress codes, and operating procedures. If they do not, they may lose the franchise. *Purchasing restrictions - Franchise owners must often buy their supplies from the parent company or from approved suppliers * Limited product - Franchise agreements allow franchisees to offer only approved products. Franchisees usually cannot launch new product lines that might appeal more to local customers
Disadvantages of Nonprofits:
* Limited in what they can use their funds for *Public scrutiny *Funds are limited, which can make it hard to generate interest *Have limits on political activity *Expenses can be expensive
What are the Advantages of Incorporation?
* Limited liability for owners *Ownership becomes transferable *Ability to attract new capital by selling stocks and bonds *Long life for the corporation
Examples of Nonprofits are..?
* Nonprofit Hospitals * American Red Cross * Public schools *Museums (Smithsonian) *Bill and Melinda Gates Foundation
What are the Characteristics of a Limited Partnership?
* Only one partner is required to be a general partner. 1. only 1 partner has unlimited liability for the firm's actions 2. the Remaining partner(s) contribute only money (not active in the business). *At least one general partner but may have any number of limited partners *If business succeeds, limited partners share in profits * If business fails, they lose only the amount of their initial investment. The liability is split equally between them with general partners, while limited partners do not have any personal liability.
What are the Disadvantages of a Sole Proprietorship?
* Owners are fully liable (Unlimited personal liability)--> responsible for the debt * Limited access to resources *Limited management and employee skills *Business doesn't exist as a separate legal entity * Lack of permanence:--> ceases to exist after owner dies *Sole proprietors may have to turn down work due to not enough time or workers to keep up with demand (can be personally and financially exhausting for small business owners) *Self-employment taxes *High business costs --> payment for equipment comes out of owner's pocket * Limited financial resources *Bad decisions are likely to be made because the owner has to make decisions without consultation
What are the different forms Non-price Competition can take?
* Physical Characteristics --> The simplest way for a firm to distinguish its products is to offer a new size, color, shape, texture, or taste. * Location--> * Service Level--> Some sellers can charge higher prices because they offer their customers a high level of service. * Advertising, image, or status--> Firms often use advertising to point out differences between their own offerings and other products in the marketplace. These product differences are often more a matter of perception than reality.
What is the Structure of a Corporation?
* The owners (stockholders) elect a board of directors. * The board of directors makes the major decisions and appoints corporate officers such as the Chief Executive Officer, Chief Financial Officer, and president *The officers run and oversee the operations and hire managers and employees *Managers and employees work in departments such as finance, sales, research, marketing, and production
Characteristics of Nonprofits:
* They are run by a board of directors (no owner) *They do not seek to make money *They use their money to expand their technology or give it to charity. They do not distribute to their owners or give to their investors. *Nonprofits cannot issue stock; no money that they make can be distributed to stockholders(profits must be invested in an organization) *Provide benefit to the public *Provide services rather than goods *The government exempts them from income taxes - However, they have to meet certain requirements in order to receive exemption from income taxes * Function like a business but have no intent on generating a profit
Disadvantages of Multi-corporations:
* Unduly influence the culture and politics in the countries they operate * In poorer countries, the jobs provided are marked by low wages and poor working conditions
Principles of Cooperatives:
* Voluntary and open membership *Democratic control of the organization by its members *Sharing of contributions and benefits by members
What are the Responsibilities of a Sole Proprietor?
** Paying employees- payroll **Paying rent- utilities & rent **Taxes to government and employment taxes (social security, medicare, and federal unemployment taxes)
What are some real world examples of partnerships?
- Ben and Jerry's ice cream - The Warner Bros - Google (founded by Larry Page and Sergey Brin) - McDonald's (founded by Richard and Maurice McDonald) - Starbucks and Barnes & Noble
Corporation growth:
- Can grow very large - One way to grow is to raise money by selling stocks or bonds - Merging, or combining with other corporations is another way to grow.
What are Examples of Limited Partnerships ?
- Directors partnering with companies investing in the movie - Real estate: the investor supplies the funds and the "general partner" manages the construction
Closely Held Corporations-
- Issue stock to only a few people, often family members - Rarely trade their stock, but instead pass it on, typically within a family - Also known as privately held corporations
What are the Characteristics of a General Partnership?
- Most common type of partnership - Shares debts and losses equally - Proportionally share the rewards - Operate similar businesses to sole proprietors.
What are Examples of Limited Liability Partnerships?
- Multi-Owner Accounting firms - Doctor offices
Characteristics of Multinational Corporations (MNCs):
- Sell goods and services in more than one country - Have headquarters in one country and branches in others - Must obey laws and pay taxes in each company they operate
Nongovernmental Organizations(NGO's):
- Some nonprofits are nongovernmental organizations -Independent -They raise money and use it to fund and carry out programs -Ex: Red Cross and Greenpeace
What requirements must a Sole proprietorship meet?
1. Authorization --> must obtain a business license 2. Site permit→ must obtain a certificate of occupancy to use another building for business 3. Name→ must register a business name
What are the characteristics of a Monopoly?
1. Economies of Scale 2. Natural Monopolies 3. Technology and Change
For Price Discrimination to work what 3 conditions must a market meet?
1. Firms that use price discrimination must have some market power --> 2. Customers must be divided into distinct groups --> 3. Buyers must not be in a position in which they can easily resell the good or service. -->
What are the different types of partnerships?
1. General Partnership 2. Limited Partnership 3. Limited Liability Partnership
What are the Four Conditions of Monopolistic Competition?
1. Many Firms --> Monopolistically competitive markets aren't marked by economies of scale. They don't have high start-up costs. 2. Few Artificial Barriers to entry --> Firms in a monopolistically competitive market do not face high barriers to entry. Patents do not protect anyone from competition. 3. Little Control over price --> a monopolistically competitive firm has only limited control over price. If the price rises too high, consumers will buy a rival's product, because close substitutes are readily available. 4. Differentiated Products --> Firms have some control over their selling price because they can differentiate, or distinguish their goods from the other products in the market.
What are the 4 strict conditions for a market with Pure Competition?
1. Many buyers and sellers --> 2. Identical Products --> In purely competitive markets there are no differences between the products sold by different suppliers. 3. Informed Buyers and Sellers -->Under conditions of pure competition, the market provides the buyer with full information about the features of the product and its price. For the market to work effectively, both buyers and sellers have clear incentives to gather as much information as possible. 4. Easy Market Entry and Exit--> Firms must be able to enter it when they can make money and leave the market when they can't earn enough to stay in business.
What are the Disadvantages of Partnerships?
1. Potential for conflict - If there's more than 1 gen partner then each one has partial control over firm 2. Unlimited Liability - General partners are liable for all business debts. - Gen partners could lose everything including personal property - If one partner actions causes a loss than all the general partners suffer 3. Lack of Permanence - If something happens to a partner and they decide to leave the partnership then there could be potential for the business to die out.
What are the three ways firms in an oligopoly can try to control a market?
1. Price Leadership 2. Collusion 3. Cartels
What are the Advantages of Partnerships?
1. Relatively easy to establish 2. Increased ability to raise funds where is more than one owner Wider pool of knowledge, skills, contacts 3. Improved management with more than one owner 4. Easier to attract investors because limited partners have limited liability to the business debts 5. Profits and losses pass through the business to the partners, who are taxed on their own personal income tax returns 6. Limited partners get to share in the profits and losses without having to participate in the business itself 7. Share liabilities/less risk 8. If there is a lack of skill or resources from one end, the other end can support the other and make up for their losses 9. They are subject to fewer government regulations
What percent of businesses in the United States are partnerships?
10%
What percent of all income of all businesses in the US do partnerships generate?
25%
What percent of sales in the United States do sole proprietorships generate?
4%
What percent of all businesses are sole proprietorships?
70%
What is a Cooperative?
A business organization whose main goal is to provide a service to you rather than make a profit for itself
What is a Sole Proprietorship?
A business owned and managed by a single individual. - Sole proprietorship is the least form of a business organization. - Must submit to inspections and follow government safety regulations.
Certificate of incorporation-
A certificate of incorporation, also known as "articles of incorporation" is a license issued by a state government allowing for the formation of a corporation.
What is a Franchise?
A contract issued by a local authority that gives a single firm the right to sell its goods within an exclusive market. * It offers a wide array of goods and services, from fast food restaurants to stores that sell diamonds
What is a Publicly held corporation?
A corporation with outstanding shares listed on a major United States stock exchange (Chevron).
In a Franchise, what is a parent company called?
A franchiser - Franchiser develops the products and systems to produce them to improve efficiency and reliability.
What is a Multinational Corporation?
A large corporation that produces and sells its goods and services in more than one country (Disney).
What is Consumer Cooperatives?
A retail outlet owned and operated by consumers that sells merchandise to members at reduced prices. * They can buy good in large quantities and can obtain goods at a lower cost
What are Right-to-work Laws ?
A measure that bans mandatory union membership
What is a "Government Monopoly"?
A monopoly created by the government
What are Trade associations?
A non profit organization that promotes the interests of a particular industry
What is a Business Franchise?
A semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a given area.
What is Mediation?
A settlement technique in which a neutral person, the mediator, meets with each side to try to find a solution that both sides will accept
What is Arbitration?
A settlement technique in which a neutral third party listens to both sides and then imposes a decision that is legally binding for both the company and the union
What is one trait all Monopolies have in common?
A single seller in a market
What is the Screening Effect?
A theory that suggests that the completion of college signals to employers that a job applicant is intelligent and hard-working
What are Service Cooperatives?
A type of cooperative that provides a service rather than a good
What is Derived Demand?
A type of demand that is set by the demand for another good or service
What is an advantage of being a franchisee?
A. brand recognition
Oligopoly Barriers to Entry -
An oligopoly can form when significant barriers to entry keep new companies from entering the market to compete with existing firms. These barriers can be technological, or they can be created by a system of government licenses or patents.
What is a Labor Force?
All nonmilitary people who are employed or unemployed
What is Stock?
All of the shares in which ownership of a corporation is divided.
What is predatory pricing?
An illegal form of price discrimination used to drive other firms out of business
What are Nonprofit Organizations?
An institution that functions like a business but does not operate for the purpose of generating profit.
What idea is Price Discrimination based on?
Based on the idea that each customer has a maxiumum price that he or she will pay for a good.
Why can't a monopolistically competitive firm raise prices as high as a true monopoly can?
Because competition would ensure that customers buy a rival firm's cheaper product
Why has franchising become popular in recent years?
Because franchises allow each owner a degree of control. The owners also benefit from the support of the parent company.
why does a monopolistically competitive firm have some control over price?
Because it can differentiate its goofs from other products
How does the Government prevent the rise of monopolies?
By blocking merges that might reduce competition and lead to higher prices.
What is another way Oligopolies occur?
Can occur because of Economies of Scale
What are examples of General Partnerships?
Doctors Lawyers Accountants Small retail stores Farms Construction firms Family businesses Design Firm
Which type of business would have the lowest technological barrier to entry?
Dog walking
Production Costs and Variety in Monopolistic Competition-
Firms in monopolistic competition may not be able to produce their goods at the lowest possible average cost. Monopolistically competitive markets have many firms, each producing too little output to minimize costs and use resources efficiently.
How do Monopolies form?
Forms when barriers prevent firms from entering a market that has a single supplier
What are closely held corporations?
Half of the stock is owned (directly or indirectly) by five or fewer individuals at any time in the second half of the year (Hobby Lobby - family owned).
What happens to a natural monopoly is a second firm enters the market?
If a second firm enters the market, competition will drive down the market price charged to customers and decrease the quantity each firm can sell. One or both of the firms will not be able to cover their costs and will go out of business.
Why is a Price War harmful to producers?
If prices go too low, then the producers wont be able to make a profit
What happens in a Conglomerate?
In a conglomerate, one company owns a controlling stake in a number of smaller companies all of whom conduct business separately and independently
What is the Sherman Antitrust Act of 1890?
Law passed by Congress that outlaws mergers and monopolies that limit trade between states
How do non profit organizations differ from corporations?
Nonprofits are exempt from income taxes
What is one advantage of a vertical merger?
It can allow a firm to operate more efficiently.
How does a Price War affect producers and consumers?
It is harmful to producers but good for consumers because they will pay less for a good or service
What are examples of Sole Proprietorships?
Local bakeries, barbershops, hair salons, bike-repair shops, corner grocery stores
What do markets with Pure Competition require?
Markets with Pure Competition require many participants on both the buying and selling sides.
Why is a purely competitive market undesirable for owners of supplier firms in that market?
Low profits
What kind of products do Monopolies sell?
Monopolies supply a unique product
In what market structure do we see a diverse, wide-ranging array of goods and services that are similar to others produced by a large number of firms?
Monopolistic Competition
What industry is characterized by firms that work hard to differentiate their products?
Monopolistic Competition
Which type of industry is advertising not necessary at all since everyone in the market structure produces an identical product?
Perfect (Pure) Competition
Output in Monopolistic Competition-
Monopolistically competitive firms sell their products at higher prices than do purely competitive firms, but at lower prices than a monopoly. As a result, total output under monopolistic competition falls somewhere between that of monopoly and that of pure competition.
The market structure with the fewest firms is almost always...?
Monopoly
What industry has one dominant firm that controls the vast majority, if not all of the market's share of sales?
Monopoly
What type of industry relies on barriers to entry to maintain almost total control of their market share?
Monopoly
In what market structures do firms watch each other's prices very carefully since price strategy is important in this system?
Oligopoly
National-level U.S. airlines, soft drink companies, and Catholic high schools in Atlanta all fall into what market structure?
Oligopoly
What is a common form of price discrimination?
One common form of price discrimination identifies some customers who are not willing to pay the regular price and offers those customers a discount.
What are Labor Unions?
Organizations which contain many workers, and help to bargain with the larger employers over wages, working conditions, or benefits that they provide to their workers.
Prices in Monopolistic Competition-
Prices under monopolistic competition will be higher than they would be in pure competition, because firms have some power to raise prices. However, the number of firms and ease of entry prevent companies from raising prices as high as they would if they were a true monopoly.
Examples of Franchises?
Pro sports teams (Braves, Falcons, Hawks), UPS, and Subway.
What is the only market structure price discrimination and market power aren't found in?
Pure Competition
What is Income stock?
Provides investors with regular income by paying dividends, helps to balance against volatile changes.
What is a good example of a natural monopoly?
Public water
What is the simplest market structure?
Pure (aka Perfect) Competition
Sole proprietorships must pay employment taxes, which include what?
Social Security and Medicare Taxes and federal unemployment taxes
What type of business organization is the most popular in the United States?
Sole Proprietorship
Why is it easy to start a sole proprietorship?
Sole proprietors do not need to file a lot of paperwork to start a business
What are Blue-Collar Workers?
Someone who performs manual labor, often in a manufacturing job, and who earns an hourly wage
What are White-Collar Workers?
Someone who works in a professional or clerical job and who usually earns a weekly salary
True or False: Sole Proprietorships can be owned by more than one person...?
TRUE
What is Contingent Employment?
Temporary and part-time jobs that are given to workers instead of full-time or permanent jobs
What is Incorporation?
The act of forming a corporation - Offers advantages to stockholders and the corporation
What is the role of Government in a Natural Monopoly?
The government allows the monopoly to form and then regulates it.
What is Offshoring?
The movement of some of a company's operations, or resources of production, to another country
What is Outsourcing?
The practice of contracting with another company to do a specific job that would otherwise be done by a company's own worker
What is Featherbedding?
The practice of negotiating labor contracts that keep unnecessary workers on the company's payroll
What is Predatory Pricing?
The practice of selling a product below cost for a short period of time to drive competitors out of the market
What is Collective Bargaining?
The process in which union and company management meet to negotiate a new labor contract
What is the Productivity of Labor?
The quantity of output produced by a unit of labor
What is the Learning Effect?
The theory that education increases efficiency of production and thus results in higher wages
What is Equilibrium Wage?
The wage rate, or price of labor services, that is set when the supply of workers meets the demand for workers in the labor market
What are the prices in a purely competitive market?
They are the lowest sustainable prices possible
Why are individuals unable to set their own prices in a purely competitive market?
They don't have enough influence over the market
In order to do business, what is one regulation that corporations have to follow?
They have to file quarterly and annual reports with the SEC
What do collusion agreements do?
They set prices and output at the levels that would be chosen by a monopolist.
Growth Stock -
This stock pays few or no dividends. The issuing company reinvests its earnings in its business. The business (and its stock) grows in value over time.
What are Producer Cooperatives?
When producers choose to work together or separately in order to maximize the efficiency of production of their products, as well as the selling and distribution.
What is Professional labor?
Work that requires advanced skills and education.Professionals are usually white-collar workers who receive a salary. - Professionals include managers, teachers, bankers, doctors, actors, professional athletes, and computer programmers.
What is Semi-skilled labor ?
Work that requires minimal specialized skills and education. Semi-skilled workers usually earn an hourly wage. They include lifeguards, word processors, short-order cooks, and many construction and factory workers.
What is Unskilled labor?
Work that requires no specialized skills, education, or training. Workers in these jobs usually earn an hourly wage. They include dishwashers, messengers, janitors, and many farmworkers.
What is Skilled Labor?
Work that requires specialized skills and training. Skilled workers need little supervision, yet usually earn an hourly wage. They include auto mechanics, bank tellers, plumbers, firefighters, chefs, and carpenters.
What are Guest Workers?
Workers that are allowed to live and work in the United States only temporarily
Who do Business Associations work with?
Works with government officials to try to promote policies that will help businesses grow and thrive
What is a Conglomerate?
a business combination merging more than three businesses that produce unrelated products or services (Samsung - makes military hardware, apartments, and ships).
Bond-
a formal contract issued by a corporation or entity that includes the promise to repay borrowed money with interest at fixed interest.
What is a "Cartel"?
a formal organization of producers that agree to coordinate prices and production. It is stronger than a collusive agreement. * Cartels are also ILLEGAL in the United States
What is a Corporation?
a legal entity, or being, owned by individual stockholders, each of whom has limited liability for the firm's debts.
What is an Oligopoly?
a market dominated by a few large, profitable firms. Oligopoly looks like an imperfect form of monopoly.
What is a Monopoly?
a market in which a single seller dominates but a monopoly has any number of buyers. * Has barriers to entry
What is Pure (Perfect) Competition?
a market structure in which a large number of firms all produce the same product and no single seller controls supply or prices; also called perfect competition.
Monopolistic Competition-
a market structure in which many companies compete in an open market to sell products that are similar but not identical. Monopolistic competition is a fact of everyday life.
What is Imperfect Competition?
a market structure that fails to meet the conditions of pure competition
What is a Natural Monopoly?
a market that runs most efficiently when one large firm provides all of the output
What is a Articles of partnership?
a partnership agreement that spells out each partner's rights and responsibilities
What is a Commodity?
a product, such as petroleum or milk, that is considered the same no matter who produces or sells it
What is a Price War?
a series of competitive price cuts that lowers the market price below the cost of production
Code of conduct-
a set of rules of principles regarding behavior
What do all types of Monopolies have in common?
a single seller that controls an entire market
What is a Limited liability partnership?
a type of partnership in which all partners are limited partners
What is a General Partnership?
a type of partnership in which all partners share equally in both responsibility and liability
What is a Limited Partnership?
a type of partnership in which only one partner is required to be a general partner, while other partners have limited responsibilities
What is "Non-price Competition"?
a way to attract customers through style, service, or location, rather than a lower price
What is a "Barrier to Entry"?
any factor that makes it difficult for a new firm to enter a market
What is a Business License?
authorization to operate a business issued by a local government
In return for monopoly status, what does a firm with a natural monopoly agree to?
agrees to let government control the prices it can charge and what services it must provide.
What is Price Fixing?
an agreement among firms to charge one price for the same good
What is Collusion?
an illegal agreement among firms to divide the market, set prices, or limit production
What is a "Trust"?
an illegal grouping of companies that discourages competition, similar to a cartel
Why can't a Monopolistically competitive firm raise prices as high as a true monopoly can?
because competition would ensure that customers buy a rival firm's cheaper product
What do Partners have to agree on matters like ethics and management style?
because if not there could be great conflict and hard to resolve.
In Economies of Scale, what is better?
bigger is better *An industry that enjoys economies of scale can easily become a natural monopoly.
What is a Partnership?
business organization owned by two or more persons who agree on a specific division of responsibilities and profits
How do corporations raise capital?
by selling stocks and bonds
What can "Barriers to Entry" lead to?
can lead to imperfect competition
What are Economies of Scale?
characteristics that cause a producer's average cost per unit to drop as production rises
Targeted Discounts in Monopolies-
companies divide consumers into large groups and design pricing policies for each group. The different prices that firms charge each group for the same good or service are not related to production costs.
What are Limited Liability Corporations?
corporate structures in the United States where owners are not personally liable for the company's debts or liabilities (Blockbuster).
Exempt-
free from a rule/obligation
What limited choice does a monopolist have to make?
has to choose either output or price but not both
What is another way cartels can collapse?
if some producers are left out of the group and decide to lower their prices below the cartel's level.
Is Collusion illegal or legal in the United States?
illegal
What do Professional Organizations work to improve?
improve the image, working conditions, and skill levels of people in particular occupations
What are Zoning Laws?
laws in a city or town that designate certain areas, or zones, for residential and business use
What are Antitrust Laws?
laws that encourage competition in the marketplace
The government would likely block a merger if the merger would...?
lead to unfair market control
What is Differentiation?
making a product different from other, similar products
A publicly held corporation has..?
many shareholders who can buy or sell its stock.
Which of the following effects of an industry's deregulation would show that it had failed to achieve its objective?
market prices have risen significantly
What is Deregulation?
means that the government no longer decides what role each company can play in a market and how much it can charge its customers.
Profits in Monopolistic Competition-
monopolistically competitive firms earn just enough to cover all of their costs, including salaries for the workers.
What is the difference between pure competition and monopolistic competition?
monopolistically competitive firms sell goods that are similar enough to be substituted for one another but are not identical.
What is a Merger?
occurs when a company joins with another company or companies to form a single firm.
What is the only way Cartels can survive?
only if every member keeps to its agree-upon output levels.
Monopolies control __________ and charge ____________?
output, higher prices
What are Fringe Benefits?
payments to employees other than wages or salaries
In addition to breaking up existing monopolies, what else does the government have the power to do?
prevent the rise of monopolies
Discounted-
priced below regular cost
To maximize profits, a seller should do what?
set its marginal revenue, or the amount it earns from the last unit sold, equal to its marginal cost or the extra cost from producing that unit.
What is Liability?
the legal obligation to pay debts
In a sole proprietorship who earns all of the firms profits but it also responsible for its debts?
the lone entrepreneur
In a purely competitive market, who determines the price and the demand?
the market determines price as a result of the total supply and demand of all individual suppliers and consumers.
What are Assets?
the money and other valuables belonging to an individual or business
What happens if a monopolist increases the price of a good?
the monopolist will sell less
What did the Sherman Antitrust Act and other laws give the government?
the power to regulate industry, to stop firms from forming cartels, or monopolies, and to break up existing monopolies.
What are Royalties?
the share of earnings given by a franchisee as payment to the franchiser
Since no supplier can influence prices in purely competitive markets, what will producers make their output decisions based on?
their most efficient use of available land, labor, capital, and management skills.
What is the problem with Monopolies?
they can take advantage of their market power and charge high prices
What do government regulators follow the effects of past mergers?
to check that they don't lead to unfair market control
What same purpose does the government use both Deregulation and Antitrust Laws for?
to promote competition
Lobby-
to try to persuade legislators to favor some special interest
What does the government try to predict when considering whether or not to approve a merger?
tries to predict the effects of the merger on prices and service
