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30 Cards in this Set

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What are the 3 types of Businesses?
1)Sole Proprietorship (70%) 2)Partnership (10%) 3)Corporations (20%)
What are the characteristics of a Sole Proprietorship?
Owned by:one individual> recieves all profits and bears all losses. Benefits:easy to start/end, control over profits and operations, lower taxes. Costs:inlimited libility, hard to raise starting funds, responsible for all losses, limited managing knowledge.
What are the characteristics of a Partnership?
Ownened by:two or more individuals> recieve all profits and bear all losses. Benefits:easier to raise starting funds, combined managerial skills, lower taxes. Costs:unlimited liability, shared profits
What are the characteristics of a Corporation?
Owned by:stockholders> entilted legally to rights and responsibilites as if one person. Benefits: limited liability, greater financial capital, unlimited life, specialized management. Costs:increased taxes, difficult to start (state rules), more bureaucratic, increased government control.
What is a stock?
Publicly traded corporations are divided into many shares or stocks that can be bought and sold on various stock exchanges
What is the DOW Jones Industrial Average?
The weighted average of the 30 actively traded blue chip stocks, and measures the overall health of stock.
What is a blue chip stock?
Stock of a company with a solid earnings record and good reputation.
What is market capitalization (market cap)?
Estimates the cost of buyig an entire business in its current state, and measures a company's total value.
How do you calculate the Market cap?
Multiply the number of outstanding shares by the current market price of one share.
What are the classes and ranges of the market caps?
Mega cap: 200bil +
Big/Large: 10bil to 200bil
Mid Cap: 2bil to 10bil
Small Cap: 300mil to 2bil
Micro Cap: 50mil to 300mil
Nano cap: under 50mil
Why is competition good?
Influences variety, lower prices, higher quality, innovation, growth, and efficiency
What are the factors in competition?
Price, Location, Quality, Experience, Selection, Brands, Popularity, Service, Endorsements, Convience, appeal, Size.
What are the 4 competitive markets?
1)Pure (perfect) Competition 2) Monopolistic Competition 3)Oligopoly 4)Monoply
What are the characteristics of a Pure (perfect)Competiton?
Firms:very many, Products:identical, Competition:only price, Entry:easy, No Barriers, "Diseconomy of Scale"
What is Diseconomy of Scale mean?
That the size of the firm does not matter.
What are the characteristics of a Monopolistic Competition?
Firms:several, Products:differential, Competition:some price, Few Barriers, "Diseconomy of Scale"
What are the characteristics of a Oligoply?
Firms:few dominating, Products:very similar, Competition: mostly non-price, Higher Barriers to entry, "Economy of Scale"
What is Price Leadership?
When a market learder sets prices.
Define Price Wars.
When firms slash prices to try to gain market share from their competitors.
Cartel Theory & Collusion
The oligopolists get together and act as if they were one monopolistic quantity to maximize profit.
What is the Game theory?
The technique that allows us to examine the strategies of Oligopolists and pick the best strategy.
What are the characteristics of a Monopoly?
Single seller, no close sunstitutes, "Price Makers", Blocked entry, Competition:advertising.
What are the Barriers to Entry in a Monopoly?
Economies of scale, legal barriers, ownership of essential resources. (they are rare)
What is a Natural Monopoly case?
When the average total cost declines over extended output in which case a monopoly would create the least amount of cost.
What is a Graphic Monoploy?
When a business is the only firm located within a large distance.
What is a Technological Monopoly?
When a company invents something and gets a patent, it will have a monopoly on that product until the patent expires.
What is the definition of an externality?
An economic side effect. Both positive and negitive externalities.
Define a Market Failure.
When the cost and benefits are not reflectd in the market prices paid by the buyers and sellers of the original product.
What are some examples of Government Monopolies?
Police, fire protection, highways, Army
What is the Sherman Anti Trust Act?
It made monopolies illegal. and Is enforced by the Federal Trade Commission(FTC).