Business Terms

Corporation Business owned by many but treated as Individual Can be sued, pay taxes Owners of corporation are stockholders Sell stocks to raise large sums of money Ex - McDonald's – sued for making people fat

Economics of Scale Goods produced by corporations made quickly=cheaper use money from stocks to invest in better equipment Fixed Cost – mortgages, tax – due every month Operating – wages, supplies – only pay if working Small companies – low fixed but high operating Make sense to shut down in bad times Corporations – high fixed but low operating Make sense to stay open even during recession *allow corporations to force small business out of business

Pool Companies agree to keep prices at a certain level Against supply and demand Only works if no one breaks deal Ex. All fast food places agree to sell burgers for a dollar. McDonalds then goes and sells for 75 cents to steal all the business

Vertical Integration Own all business you need to operate Save money to allow growth EX - Andrew Carnegie (steel) American Apparel Makes own fabric, dye, thread, etc

Horizontal Integration Combine same type of businesses together Almost monopoly – keep prices low because of foreign companies & potential competitors EX - Rockefeller – 90% of oil - Gap - Owns Banana Republic, Old Navy, Gap

Trust Government make illegal for companies to own stock in another without permission from the state. Afraid of monoplies Get around it by creating trusts - Allows on person to manage another's property (trustee) Not owning just managing, so not illegal Ex – Rockefeller's Standard Oil Trust

Holding Company Doesn’t produce anything Owns stock in companies that produce Ex - Berkshire Hathoway Owns Benjamin Moore, Dairy Queen, Geico, Pampered Chef