What are the three types of business organizations? Sole Proprietorship Partnership Corporation

Sole Proprietorship Strengths Weaknesses Easy to start Owner keeps all profits Easy to get out of Profits only taxed once Weaknesses Unlimited liability Can be hard to raise capital Owner may lack needed skills (especially managerial)

Partnership Strengths Weaknesses Both partners can bring a different set of skills to the business (two heads are better than one) Easier to raise capital Share some liability Weaknesses Partners are responsible for each other Potential conflict between partners Business could end if one partner leaves

Corporation Strengths Weaknesses Easy to raise capital (just sell more shares) Professionals are hired to run the business Owners have limited liability Weaknesses Can be expensive to start Owners are not directly involved in running the business Profits are taxed twice

Market Structures How does the level of competition affect price and production among businesses?

Warmup What are the benefits of competition in our system? Better Prices Better Quality Invention Innovation

Perfect (pure) competition Many sellers Selling Identical Products “Price Takers” – can’t influence price Easy to enter No non price competition

Monopolistic Competition Many sellers Selling similar but different products Some control over price Fairly easy to enter A lot of non price competition

Oligopoly Few Sellers Selling Similar or Different products A lot of control over price (collusion) Difficult to enter

Monopoly One business Selling unique products A lot of control over price – “Price Makers” Difficult to enter

Legal Monopolies Natural – exist for efficiency purposes (Marta, Georgia Power) Geographic – due to location (general store in small town) Technological – ability to make something no one else can make (pharmaceutical drug) Government – market run by the Government (United States Post Office)

Competition Market Game How does the amount of competition in a market affect the prices and revenues of the firms in that market?