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Economics SL (Year 1) - IB > Unit 3 - Market Structures > Flashcards

Unit 3 - Market Structures Flashcards

1
Q

Entrepreneur

A

Self-employed business person willing to take risks to keep business

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2
Q

Firms

A

Privately owned organization engaged in business activity

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3
Q

Unlimited Personal Liability

A

Owner(s) of business personally responsible for all debts incurred.

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4
Q

Progressive tax

A

Tax in which the tax rate increases as an individual’s income increases

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5
Q

Proxy

A

Document signed by shareholder appointing another person to vote on behalf of shareholder

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6
Q

Dividend

A

Corporation profits distributed to shareholders on per-share basis

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7
Q

Privatize

A

Give ownership of government enterprise to private sector

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8
Q

Corporation

A

Business firm recognized legally as separate entity

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9
Q

Private Corporation

A

Company privately controlling all sales of shares

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10
Q

Public Corporation

A

Firm that trades shares in stock market

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11
Q

Articles of Incorporation

A

Legal document filed with government that incorporates business

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12
Q

Shares

A

Corporate assets sold to buyers, giving partial ownership of company subject to profits and losses.

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13
Q

Shareholders

A
  • Owners of shares of a corporation
  • Entitled to voting rights and share of corporation’s profits.
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14
Q

Government Enterprise

A

Business that provides services owned by federal, provincial, or municipal government.

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15
Q

Crown Corporation

A

Business owned by federal government

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16
Q

Non-Profit/Charitable Organization

A

Government-registered form of business

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17
Q

Sole Proprietorship Details

A
  • Business owned by 1 person
  • Least complicated form of business
  • Responsible for firm’s debts and entitled to firm’s profits
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18
Q

Advantages of Sole Propetiorship

A
  • Keep financial affairs, business dealings confidential
  • Able to keep own profits
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19
Q

Disadvantages of Sole Properitorship (A)

A
  • Responsible for all debts and assets may be used to pay them
  • Don’t last long due to difficulty planning
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20
Q

Disadvantages of Sole Properitorship (B)

A
  • No one else to run business or raise funds
  • Difficult to obtain financial capital
  • Pay more tax b.c income tax is progressive
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21
Q

Partnership

A
  • Owned by two/more people by terms of legal document called partnership agreement
  • Personal assets cannot be used to pay off debts
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22
Q

General Partnership

A

All partners take part in management of firm and have unlimited personal liability for business losses

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23
Q

Limited Partnership

A
  • Limited partners and at least one general partner
  • Limited partners not permitted to take part in management of business
  • Are liable for debts up to amount of original investment.
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24
Q

Advantages of Partnership

A
  • Pooling of talent and capital
  • High personal motivation and few legal expenses needed to pay individually.
  • Easier to get loans as more people are personally responsible for repayment
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25
Q

Disadvantages of Partnership (A)

A
  • If limited partners fail to pay debts, they fall onto general partners
  • Partners have to pay progressive taxes - less incentive to make money
26
Q

Disadvantages of Partnership (B)

A
  • Other partners have high ability to buy retiring partner than allow new member
  • Can only use personal savings to take mortgages to raise money
27
Q

Disadvantages of Partnership (C)

A
  • Partnerships legally end if one of general members becomes unfit for business
  • Partnerships don’t last long
  • Disputes may arise
28
Q

Corporation Details

A
  • At annual meeting: Shareholders elect board of directors to run company
  • Investors don’t have responsibility to pay company fees
29
Q

Common Share

A

Provide a shareholder with voting rights

30
Q

Preferred Share

A

Gives shareholder preferential position for profits but don’t provide voting rights

31
Q

Advantages of Corporation

A
  • Can self-finance from size
  • Risk of owners restricted to the amount invested
  • Can expand easier
32
Q

More Advantages of Corporations

A
  • Shares can be transferred easily
  • Even if shareholder leaves, corporation still stands
  • Lasts longer and pays lower tax
33
Q

Disadvantages of Corporation

A
  • High fee to pay to start corporation
  • Must keep lists of shareholders, directors, assets, and business dealings with govt
  • Reduced personal incentive in seeing corporation grow
34
Q

More Disadvantages of Corporation

A
  • Host annual meetings, produce annual financial statement and file corporate tax
  • Gives info to competitors but prevents price fixings
35
Q

Government Enterprise

A
  • Provide services private sector doesn’t offer
  • Provide competition to industries by single firm
  • Increase employment
36
Q

Forms of Government Enterprise

A
  • Public utilities supply
  • Provincial Control Boards
  • Housing Corporations (affordable shelter)
  • Transit Commissions (affordable public transportation)
37
Q

Advantages of Government Enterprise

A
  • Host Natural Monopolies at lower cost to customers
  • Provide services not given by private sector
  • Increase competition
38
Q

Natural Monopolies

A
  • Occurs in given industry due to high start-up costs
  • Made to protect consumers and reduce costs
39
Q

Disadvantages of Government Enterprise

A

Less productive and/or efficient

40
Q

Non-profit and Charitable Organizations

A
  • Private institutions that aren’t allowed to generate profits
  • No income tax
  • Managed by elected trustees or board of directors
41
Q

Perfect Competition

A
  • Many producers and uniform product
  • Ex: suppliers of agricultural goods
  • Many buyers and sellers, so they have no control over supply or price
42
Q

Aspects of Perfect competition

A
  • Start-up and exit costs are both low
  • Little non-price competition
  • Main goal is to decrease cost
43
Q

Monopolistic Competition

A
  • Many producers that differentiate products
  • Exist in most markets
  • Individual firms large enough to influence total supply
  • Somewhat easy for new firm to startup
44
Q

Product Differentiation

A
  • Product Quality Increase
  • Service Improvements
  • Accessibility
  • Promotion
45
Q

Oligopoly

A
  • At least 50% market share for largest five firms
  • Produce similar OR different products
  • Varying freedom to set supply
  • Significant entry barriers
  • Intense non-price competition
46
Q

Characteristics of Oligopolies

A
  • Prices for products stay relatively similar within small range
  • Common pricing strategy occurs
47
Q

Collusion

A

Secret agreement for a dishonest purpose

48
Q

Monopoly

A
  • One firm controls marketplace
  • Unique product
  • High barriers to entry
49
Q

Characteristics of Monopolies

A
  • Can produce large output from financial resources
  • No non-price competition
  • Sets whichever price making most profit
50
Q

Legal Monopoly Types

A
  • Copyright law
  • Patent law
  • Local monopoly
  • Exclusive franchises
51
Q

Copyright Law

A

Gives writers control of work they produce

52
Q

Patent Law

A

Gives developers sole right to sell product for limited time

53
Q

Local Monopoly

A

Sole right to provide a product or service within one firm

54
Q

Merger

A

The joining of two firms or companies to operate effectively as one.

55
Q

Acquisition

A

The purchase of controlling interests in one company by another

56
Q

Horizontal Integration

A

Joining together of two firms producing same product as one firm

57
Q

Horizontal Merger

A

Consolidation of two firms producing same product or service

58
Q

Vertical Integration

A

Merging of two firms involved in different stages of production process of good or service

59
Q

Holding Company

A

Enterprise holding shares in other producing companies

60
Q

Conglomerate

A

Group of companies involved in different industries but controlled by central management group

Economics SL (Year 1) - IB (5 decks)

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