Business Organizations
Sole Proprietorship's are the most numerous business organizations in the United States why are they the easiest to start?
In a sole proprietorship the owner has full control and decision making power and you get to keep all of the profits. You also don't have any state or federal paperwork.
Phone Providers (Verizon, T Mobile At@T) are an example of an oligopoly why?
their are just a few competitors in the business its extremely difficult to enter the market and one company has big effect on prices.
What does it mean if a product has a positive or negative externality?
It means something comes with a product that effects other people that may not be shown in price. (Can be positive or negative)
Corporations are the most profitable business structure in the U.S. today. Why
It is much easier to raise financial capital (loans) as with so many investors liability is limited, it has unlimited life. With the money raised they can buy the best equipment and managers leading to lower prices.
What type of market structure would barber shops fall under? Why?
Monopolistic competition as there are many competitors selling similar but not identical products and one company has a very small effect on prices.
How can the government encourage products with positive externalities?
They can provide tax breaks (school supplies healthy food) subsidies (government did this with electric cars) or just outright pay for it (vaccines school lunch, schools)
Why might a person want to have a business partnership instead of a sole proprietor?
With more than one person it's easier to reach the startup cost, you can specialize in certain areas and have someone to challenge your blindspots.
Downsides arguments can occur and you are liable for every decision your partner makes.
Why does the government try to outlaw monopolies?
With no competitors they have complete control over pricing and can charge whatever they want.
How can government try to deal with the harmful affects of negative externalities.
they can regulate it (safety standards for cars)
they can tax it (cigarettes )
they can ban it (leaded gasoline)
If you want to have control over your own company why might becoming a corporation be a bad idea for your company?
Unless you own more than half the stock the board of directors or shareholders can vote you out and essentially fire you from your own company.
What is an example of a natural monopoly or a government monopoly? Why doesn't the government shut them down?
Natural monopoly- utilities company regulated by the government but it is overall cheaper for electricity, to be produced by one consumer.
Government Monopoly- DMV, streetlights, roads Government more efficient when items involved don't involve profit.