M2 Study guide Flashcards
cartel
organization of producers established to set productions price for product
describe a monopolistic competition
may producers
different products
barriers to entry
Hoe do economies of sclae help larger buisnesses
LArger buisness will set their products & make more profit
economies of scale
proportionate saving in costs gained by increased level of production
Partnership(s)
buisness run by two people
3 advantages of a sole proprietorship
Easy to start up
Owner keeps all profits
doesnt have to pay sperate buisness taxes
Corporation
form of buisness organization recognized by law as a seperate legal entity
Describe the role of the government in maintaining compettition
Passed laws limiting monopolies; mergers
3 disadvantages of a proprietorship
Raising finacial capital
unlimited liability
limited life
3 advantages of a partnership
sharing of profits
ease of start up
ease of management
special legal status
conglomerate
combines two or more unrelated firms
14th admendment
gives buisness legal support
(property owned by a buisness)
concentration ratio
total percentage of top four producers in an industry
If monopolies are so bad, why does the gov. allow some to exist
Monoplies can produce neceasary services @ a reasonable price to consumers
3 advantages of a corporation
easy to raise financial capital
ease of transferring ownership of corporation
unlimited life
3 disadvantages of a franchise
might have to pay back franchise
dont provide high quaility products of cleanliness
spenning millions of money
Horozotal merger
combines two firms in an industry producig/selling same product
3 disadvantages of a partnership
Each partner is fully responisble for acts of all other partners
limited life
potential for conflict beteen partners
resposible of debts
market share
percentage produced by one company in an industry
Monopolistic competion
has all characteristic of perfect competition except product diffenfentation
How does the 14th admendment help buisnesses
gives legal suport, allowing buisness to own property
Would the gov. allow (Department of Justice) allow Keloggs and General Mills to merge? Why not?
NO b/c the concentration ratio is 60% which isnt allowed
What are two advantages of franchises over sole proprietorships
National Advertising, reduces risk asscociated w/ sale
Perfect competition
large # of well informed independent buyers and sellers who freely exchange identical products
Describe the role of the gov. in preventing deceptive advertising
FTC
unlimited liability
owners personally & fully resposible for all losses and debts of buisness
Describe the role of the gov. in ensuring fair pricing
Depatment of Justice requlates
What does the department of justice seek to maintain?
Competitive markets so consumers can get, low prices, variety of products, better quality goods, convenience and service, innovation in the market, truth in advertising
Laissez faire
belief that the gov. shouldnt interfere with buisnesses
Why does advertising play no role in either perfectly competitve markets or monoploies
no matter what, a consumer will have to by a certain product because there are no subsitutes
non price leadership competition
using product diffrentiation & advertising to attract customers
price leadership
dominant firm sets price and other smaller buisness follow
Monoploly
one one seller for a particular product
3 advantages of a franchise
right to use company name, personael, national ads
buy to succsessful company make money
agreement to franchise reduces risk associated with sole prorietorship
Oligopoly
few very large sellers dominate the industry
Which buisnnes is the easiest to start
Proprietorship
vertical merger
combines companies in two different industries producing different goods
limited liability
owner’s has some responsibilty
Sole Proprietorships
Buisness owned and run by one person with all rights to all profits and unlimited liabilty for all debts of the firm
Which buisness type earns the greatest amount of profits
corporation
double taxtion
Taxtion of dividends both corporate profit and personal income
Sherman Anti-trust-Act
No one is allowed to make any kind of agreement, conspiracy or any combination to restrain tade/fixed prices
collusion
producers get together and make agreements on production levels and prices
Stock
certificate of ownership in a corporation
3 disadvantages of a corporation
must keep detailed sales and expense records
double taxtion
owners share holders have little voice in how buisness is run
Franchise
Contract which a corporation allows a person/group to use payments an meet certain requirements
