SSEMI4 The student will explain the organization and role of business and analyze the four types of market structures in the U.S. economy. a. Compare and contrast three forms of business organization—sole proprietorship, partnership, and corporation

three main forms of business organizations

Related vocab Unlimited Liability means that one’s personal assets can be seized to pay business debts. Limited Liability means the owners of the corporation cannot lose more than what they paid for their stock if the corporation fails. Limited Life means that the death of an owner ends the business and it must be reestablished in the name owner’s name(s). Double Taxation happens to a corporation when the company is taxed on its profits and then the shareholders are taxed again on the dividends they earn from the company.

b. Explain the role of profit as an incentive for entrepreneurs.

profit motivates entrepreneurs An entrepreneur must use their own time and/or money to start their business. In exchange for this risk, the entrepreneur hopes for a reward in the form of profits from the business. Many businesses fail and the entrepreneur could lose everything that he or she put into the business. It is only the potential to earn profits that motivates entrepreneurs to start businesses.

c. Identify the basic characteristics of monopoly, oligopoly, monopolistic competition, and pure competition. characteristics of monopoly, oligopoly, monopolistic competition, and pure competition.

four different types of market structures Pure (Perfect) Competition: A market structure characterized by a large number of buyer and sellers of an identical product. (Example: commodities like crude oil) Monopolistic Competition: A market structure characterized by a large number of buyers and sellers of products that are similar to one another be can be differentiated by brand, quality, etc. (Example: restaurants and retail clothing sellers) Oligopoly: A market structure characterized by only a few sellers of a product who dominate the market. (Example: breakfast cereals and natural gas) Monopoly: A market structure characterized by only one seller of a product dominating the market. (Example: electrical power companies and cable television companies)

CHARACTERISTICS OF THE FOUR MARKET STRUCTURES Number of Sellers: Are there many, few, or one seller(s) of the product? Price – setting Power: Can the individual firms in the market for a product have any control over the price they charge? Product Differentiation: Is there any difference between the products sold by the sellers in the market for the good? Non- Price Competition: Can the firms in the market use methods other than price to attract customers? Barriers to Entry: Are there any obstacles that prevent other firms from entering the market for the good?

CHARACTERISTICS OF THE FOUR MARKET STRUCTURES long-run Profits: Are firms in the market able to make economic profits (long-run) as well as accounting profits (short-run)? Economic Profits: Money left over for a firm after covering both out of pocket expenses (explicit costs) and opportunity costs (implicit costs). Accounting Profits: Money left over for a firm after covering out of pocket expenses (explicit costs).