Econ Unit 3
Terms
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- What are the 3 types of Businesses?
- 1)Sole Proprietorship (70%) 2)Partnership (10%) 3)Corporations (20%)
- What are the characteristics of a Sole Proprietorship?
- Owned by:one individual> recieves all profits and bears all losses. Benefits:easy to start/end, control over profits and operations, lower taxes. Costs:inlimited libility, hard to raise starting funds, responsible for all losses, limited managing knowledge.
- What are the characteristics of a Partnership?
- Ownened by:two or more individuals> recieve all profits and bear all losses. Benefits:easier to raise starting funds, combined managerial skills, lower taxes. Costs:unlimited liability, shared profits
- What are the characteristics of a Corporation?
- Owned by:stockholders> entilted legally to rights and responsibilites as if one person. Benefits: limited liability, greater financial capital, unlimited life, specialized management. Costs:increased taxes, difficult to start (state rules), more bureaucratic, increased government control.
- What is a stock?
- Publicly traded corporations are divided into many shares or stocks that can be bought and sold on various stock exchanges
- What is the DOW Jones Industrial Average?
- The weighted average of the 30 actively traded blue chip stocks, and measures the overall health of stock.
- What is a blue chip stock?
- Stock of a company with a solid earnings record and good reputation.
- What is market capitalization (market cap)?
- Estimates the cost of buyig an entire business in its current state, and measures a company's total value.
- How do you calculate the Market cap?
- Multiply the number of outstanding shares by the current market price of one share.
- What are the classes and ranges of the market caps?
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Mega cap: 200bil +
Big/Large: 10bil to 200bil
Mid Cap: 2bil to 10bil
Small Cap: 300mil to 2bil
Micro Cap: 50mil to 300mil
Nano cap: under 50mil - Why is competition good?
- Influences variety, lower prices, higher quality, innovation, growth, and efficiency
- What are the factors in competition?
- Price, Location, Quality, Experience, Selection, Brands, Popularity, Service, Endorsements, Convience, appeal, Size.
- What are the 4 competitive markets?
- 1)Pure (perfect) Competition 2) Monopolistic Competition 3)Oligopoly 4)Monoply
- What are the characteristics of a Pure (perfect)Competiton?
- Firms:very many, Products:identical, Competition:only price, Entry:easy, No Barriers, "Diseconomy of Scale"
- What is Diseconomy of Scale mean?
- That the size of the firm does not matter.
- What are the characteristics of a Monopolistic Competition?
- Firms:several, Products:differential, Competition:some price, Few Barriers, "Diseconomy of Scale"
- What are the characteristics of a Oligoply?
- Firms:few dominating, Products:very similar, Competition: mostly non-price, Higher Barriers to entry, "Economy of Scale"
- What is Price Leadership?
- When a market learder sets prices.
- Define Price Wars.
- When firms slash prices to try to gain market share from their competitors.
- Cartel Theory & Collusion
- The oligopolists get together and act as if they were one monopolistic quantity to maximize profit.
- What is the Game theory?
- The technique that allows us to examine the strategies of Oligopolists and pick the best strategy.
- What are the characteristics of a Monopoly?
- Single seller, no close sunstitutes, "Price Makers", Blocked entry, Competition:advertising.
- What are the Barriers to Entry in a Monopoly?
- Economies of scale, legal barriers, ownership of essential resources. (they are rare)
- What is a Natural Monopoly case?
- When the average total cost declines over extended output in which case a monopoly would create the least amount of cost.
- What is a Graphic Monoploy?
- When a business is the only firm located within a large distance.
- What is a Technological Monopoly?
- When a company invents something and gets a patent, it will have a monopoly on that product until the patent expires.
- What is the definition of an externality?
- An economic side effect. Both positive and negitive externalities.
- Define a Market Failure.
- When the cost and benefits are not reflectd in the market prices paid by the buyers and sellers of the original product.
- What are some examples of Government Monopolies?
- Police, fire protection, highways, Army
- What is the Sherman Anti Trust Act?
- It made monopolies illegal. and Is enforced by the Federal Trade Commission(FTC).