Legal Forms of Business
What is sole proprietorship?
A firm with one owner who has full control
The standard economic model assumes firms choose a level of output that ??? (fill in the blank)
Maximizes Profit
Production is the process of turning inputs into output. Name some inputs!
Land, labour, capital, entrepeneurship
Complete the equation: Total cost = ? + ?
TC= FC+VC
What is revenue?
Revenue is what a firm receives from sales (not to be confused with profit which is only part of revenue)
What is a partnership?
A firm with shared ownership and skills where partners are liable for each other's business debts
Who are the stakeholders in a firm?
Shareholders, workers, consumers, communities
Are inputs fixed or variable?
In the short term, capital is fixed. Long term all inputs are variable
Name an example of a fixed cost
Rent, insurance, salaried managers, equipment leases
Complete the equation: Total Revenue (TR) = ? x ?
TR = Price x Quantity Sold
What is a corporation?
What is a possible objective of workers as stakeholders?
Higher wages and job security
What is total product?
The total output produced as the variable input changes
Name an example of a variable cost
Ingredients, hourly wages, packaging, electricity
What is Average revenue?
Average revenue is total revenue divided by quantity of output
What is incorporation?
The process of a business/ firm becoming a separate legal entity
What is a possible objective of shareholders?
To gain profit on their investment through their dividends
What is marginal product?
The extra output from one or more units of the variable input
Do fixed costs have to be paid even at zero output?
Yes!
What is marginal revenue?
The extra revenue generated by selling another unit OR total revenue divided by small changes in quantity of output
What is the disadvantage or costs of incorporation?
What is a possible objective of consumers and communities?
Lower prices and employment in the community without pollution
What is the law of diminishing returns?
You can only add so many workers before they start to add less output than before, therefore driving up output costs per unit
Complete the equation: Average fixed costs (AFC) = ? ÷ ?
AFC = FC ÷ Q
What information does break even analysis tell a new business?
The minimum sales it needs to survive