Business Organization - number of owners - Market Structure - number of sellers -

What is this standard about? Business Organization How does a entrepreneur, when setting up a business, decide how to best organize it? Market Structures There are different types of markets for different products. Does a producer choose the type of market, or is it chosen by the G&S produced?

Business Organization 3 questions for entrepreneurs… Should you operate a business on your own? Would having a partner be better? What does it mean to incorporate a business?

KEY IDEAS Sole Proprietorship Partnership Corporation risk vs. profit decision-making capital investment liability flexibility # of owners, profits, capital

Examples of Business Organization: Sole Proprietorship Most small businesses, franchises, Rigby’s, Wilson’s Bakery Make up majority of businesses in the U.S., generates least total profit Partnership Law offices; Medical practices; Google & Twitter both started as partnerships Corporation Coca Cola, Pepsi Cola, Ford, Microsoft Makes up minority of businesses, generate most total profit

Business Organization established to… 1 Engage in commercial enterprise consisting of… 2 Sole Proprietorship >Owned/operated by a single person >75% of US businesses >6% of sales Partnership >Owned by 2+ people >Responsibility, profit divided 3 4 Corporation >Legal entity owned by stockholders >20% of US businesses >Produces most of US G&S Advantages 5 Easy to start Few regulations Full Control 7 9 Easy to start Specialization Greater access to FoP Limited Liability Double taxation Permanence Easy to obtain FoP Disadvantages 6 Unlimited liability Limited access to FoP 8 Less personal Less Control Potential for Conflict 10 Difficult to start

Monopolistic Competition Perfect Competition Monopolistic Competition Oligopoly Monopoly KEY IDEAS >Barriers to entry >Product differentiation >Price-setting power: price makers or price takers? Number of sellers, products Control over price & barriers to entry

Other Examples of Market Structures: Perfect Competition Farmers, fishermen (&women), Restaurants (fast food, steak, seafood, Italian), Monopolistic Competition Gas Stations, clothing Oligopolies Cellphone service providers, Big 3 American automakers, computer operating system providers (Apple, Microsoft), all auto makers Monopolies Pharmaceutical companies, Railroads & Steel companies in the late 1800s, early 1900s; nationalized industries (socialism, communism); professional sports teams, vendors at a concert or sporting event, utilities

Barriers to Entry; Control over Price which is… 1 Type of market based on: The G/S How many firms in the mkt MARKET STRUCTURE comprised of… 2 4 Perfect Competition Monopolistic Competition 3 Oligopoly 5 Monopoly characterized by… -Many buyers & sellers (price takers) -Identical G&S -No barriers to entry/exit -No surpluses/shortages -Many firms -Similar but not identical G&S -Few barriers to entry/exit -Non-price competition -Differentiated G&S 8 -3-4 large firms dominate the market -High barriers to entry -Price Wars 9 -One seller (price maker) -Significant barriers to entry/exit -Can practice price discrimination 6 7 Barriers to Entry; Control over Price Number of Sellers, Products in the market