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61 Cards in this Set

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  • Back
sole proprietorship
a business organization in which the business is owned and managed by a single individual.
what are the most and least common forms of busniess organizations?
most=sole proprietorship
least= partnership
a business organization owned by 2 or more persons who agree on a specific division of responsibility and profits
3 types of partnerships
general (partners share equally)
limited (one person has more control)
limited liability (all partners are limited partners)
a business organization that's a legal entity set up by a charter (articles of incorporation), owned by individual stockholders, each of whom has limited liability for the firm's debt
multinational corporation
operates in more than 1 country at a time
business franchise
a semi-independent business that pays fees to a parent company (ex/ fast food)
advantages/disadvantages of sole proprietorship
easy to establish, few regulations, sole profit receiver, full level of control, easy to discontinue
personal liability,limited access to resources, lack of permanence
advantages/disadvantages of partnership
easy to establish, shared decision-making and specialization, larger pool of capital, not subject to double taxation
unlimited liability,potential for conflict, lack of permanence
advantages/disadvantages of corporation
limited liability for owners, transferable ownership, ability to attract capital, long life, more potential growth
expense and diffilculty of start up, double taxation, potential loss of control by founders, slow decision-making, lots of legal requirements
advantages/disadvantages of a franchise
management training and support, standardized quality, national advertising programs, financial aid, centralized buying power
high fees and royalties, strict operating stds, purchasing restrictions, lmt. product line
What are the 2 types of corporations?
Closely held and loosely/ publicly held
Closely held corporation
issue stock to very few (nepotism) and are privately held
publicly held corporation
has many shareholders who can buy/sell stock on the open market
Corporate Chain of Command
corporation owners (stockholders)--> elects
Board of Directors ( decision makers)--> appoints
Corporate Officers (runs corp./oversees production)
--> hires
managers and employees (does the work)
How are corporations financed?
PROFITS! (2/3)
selling stocks and bonds
borrowing money
What's the difference between a stockholder and a bondholder?
stockholder= an owner that receives dividends
bondholder= creditor that gets interest
What are the 2 types of stock?
common and preferred stock
What is common stock?
gets ownership, gets to vote for Board of Directors, gets dividends ad stock growth
What is preferred stock?
gets ownership, no vote for board of directors, gets stock growth and FIXED RATE DIVIDENDS
New York Stock Exchange (NYSE)
aka Big Board, DOW
fractional reports on stock prices
blue chip companies
3000+ companies (DOW=30 industrial companies)
largest in US
midsize companies, smaller of the exchanges, autoated/computers (technology companies)
S+P 500


much smaller exchange-->500 companies

40,000 listing on the over-the-counter market, unknown small companies, dirt cheap, learner's market
stock volume
how many shares have been traded for the day
what are the 3 ways in which corporations combine?
horizotal mergers, vertical mergers, congomerates
horizontal merge
joins 2 or more firms competing in the same market w/ the same good or service
vertical merge
joins 2 or more firms involved in different stages of producing the same good or service. They can control all phases of production
when firms buy other companies that produce totally unrelated goods or services. more than 3 businesses that make unrelated products, and no.1 business earns the majority of the profits
why do corporations combine?
it can lead to larger, more efficient firms.
larger firms can produce and sell goods at lower prices and eventually gain monopoly power
improve sales + increase control
What is a cooperative?
a business organization owned and operated by a group of individuals for their shared benefit.
3 types: consumer (ex/ special deals for Loehmans members), service (insurance), producer (agricultural marketing)
Non-profit organizations
institution that functions like a business but doesn't generate profits.
professional org., business assoc., trade assoc., labor union
provides services rather than goods
the struggle among producers for the $$$ of consumers
market structure
describes different types of competition
perfect competition
a market structure in which a large number of firms all produce the same product.
pure monopoly
"a single seller in the market"
one firm, no substitutes, difficult to enter/capital
what must market conditions be for perfect competition to exist?
many buyers and sellers participate in the market
sellers must offer identical products (commodities)
buyers and sellers must be well informed about products
sellers must be able to enter/exit the market freely

(ex/ agricultural products)
how does perfect competition affect prices?
individual firms can't influence prices.
lowest sustainable prices possible.
how do pure monopolies affect price?
they can take advantage of their market power and charge higher prices
Monopolies considered "good" or legal
government monopoly (ex/ post office)
government-regulated monopoly (ex/ utilities)
b/c they dont waste resources and have set prices
technological monopolies
b/c patents encourage research-->societal improvement
monopolistic competition
similar features as perfect competition.
many companies sell products that are similar but not identical
(ex/ airlines, retail stores, fast food)
What must market conditions be for monopolistic competition to exist?
many firms
few entry barriers
slight control over price
*differentiated products (ex/ brand name loyalty
-->increases profit)
Aside from prices, how do businesses compete?
physical characteristics, location, service level, advertising/image/status

competive vs. imformative advertising
a market structure in which a few large firms dominate the market (3-4 firms control 70% of market)
pure oligopoly vs. differentiated oligopoly
pure= identical product (ex/ oil, steel, lumber)
differentiated= similar product (ex/ cars, cereal)
What market conditions must be present for an oligopoly to exist?
barriers to entry
economies of sale (avg. cost of production decreases + output increases)
How do oligopolies determine price?
collusion, cartel, price wars
an agreement among firms to set prices and production levels (price-fixing)
a formal organization of producers that agree to coordinate prices and production
4 skill levels of workers
1. unskilled-no education (hourly wage)
2. semi-skilled- minimal education (hourly wage)
3. skilled- requires education, no supervision necessary (still hourly wage)
4. professional labor- requires advanced education (yearly salary)
what is the learning effect?
education increases productivity, and results in higher wages
How has the government attempted to regulate labor?
In the 1930s <3 support
Fair Labor Std.s Act
in the 1940s not so good
Taft-Hatley and right-to- work laws
Labor supply goes up when ______ go ____
wages; up
the amt. of $$$ paid on the basis of time worked (usu. hours)
Worker supply and demand is determined by:
worker productivity, worker education, market competition and # of employees, availability of substitutes (machines), wages
what were the first 3 major unions in the US?
Knights of Labor
American Federation of Labor
Congress of Industrial Organizations (splinter group)
the last 2 merged to form AFL-CIO
right-to-work laws
banned mandatory union membership
types of "shops"
closed-you MUST join union (illegal now)
open- don't have to join
union- after a reasonable amt. of time, you should join
Collective Bargaining
used to negotiate contracts between labor and management
Mediation vs. arbitration
both 3rd party decisions
mediation=non binding
arbitration= binding
Factors used by strikers
legal: strikes (sometimes), primary boycott, picketing
illegal: secondary boycott
how can management respond to strikers?
lockout, hire scab labor
blacklisting, yellow dog contract, company union