1. SSEMI4 The student will explain the organization and role of business and analyze the four types of market structures in the U.S. economy.
c. Identify the basic characteristics of (1) monopoly, (2) oligopoly, (3) monopolistic competition, and (4) pure competition.

2. Competition, Market Structures, and the Role of Government

3. Market Structures What is the primary aim/goal of businesses?
To maximize profits
What is competition?
Striving against others to reach an objective

4. What are market structures?
We are NOT talking about economic systems like command, market, mixed or traditional.
All of the market structures that we will learn about in this standard can be found within the American mixed economy.

5. 4 Types of Market Structures
Pure/Perfect Competition: a market with fair competition and no government or non-economic factors dictating price, supply or demand.
Large number of buyers and sellers
Identical products (think substitutes)
Well informed buyers and sellers
No barriers to entering market
More Competition Less Competition

6. Pure/Perfect Competition
Many buyer/sellers +
Identical Products

7. Monopolistic Competition
Meets all condition of perfect competition except for having identical products.
Characterized by product differentiation
Monopolistic competitors use non-price competition
Advertising, giveaways, or other promotions
More Competition Less Competition

8. Monopolistic Competition
Gap Levis Lucky
Same as pure competition except for product differentiation

9. Monopolistic Competition
Are these shampoos/conditioners different?
Pantene $ Frederic Fekkai $54

10. Monopolistic Competition
Are these mascaras different?
Maybelline Sisley
$4 $43

11. Oligopoly A few very large sellers dominate the industry
Oligopolists act interdependently by lowering prices soon after the first seller announces a price cut or offering new products after another firm does
E.g., car companies all offering 0% financing or introducing a similar model after a competitor does
Engage in price wars
Collusion: formally agree to set prices (illegal; doesn’t happen often)
More Competition Less Competition

12. Oligopoly
Ipod Zune

13. Oligopoly
Few producers control supply and price

14. Coca-Cola Classic Coca-Cola classic Sprite Dasani Barq's Dannon Nestea
Rockstar
Evian
Fanta
Fresca
Minute Maid
Mr. Pibb
Powerade
Seagrams Ginger Ale & Mixers
TAB

15. Pepsi-co Aquafina Pepsi Mountain Dew Sierra Mist Sobe Lipton Brisk Tea
MUG Root Beer
Slice
Gatorade
Dole Juice
Tropicana

16. Cadbury Schweppes 7 Up Canada Dry Clamato Dr Pepper Hawaiian Punch
Mott's
Orangina
Snapple

17. Toyota
Toyota
Scion
Lexus

18. Chrysler
Chrysler
Jeep
Dodge

19. General Motors
Chevrolet
Buick
Pontiac
GMC
Saturn
Hummer
SAAB
Cadillac

20. Monopoly Only one seller of a particular product
Few monopolies in our economy

21. Monopoly One seller dominates the market with no close substitutes
Barriers prevent other firms from entering market
Monopoly is able to dictate price & output
More Competition
Less Competition

22. Monopoly
Natural Monopoly - efficient production by a single supplier

23. Monopoly
Geographic Monopoly - small town or isolated location

24. Monopoly Technological Monopoly - new invention
Patent: exclusive right for 17 years
Segway

25. Monopoly Technological Monopoly Copyright: lifetime + 50 years
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26. Monopoly Government Monopoly - government owned businesses
But is this a true monopoly? Does USPS have competition?

27. 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.

28. Sole Proprietorships
Sole proprietorships are easy to start, but owners have unlimited liability.
Sole proprietorships are businesses owned and run by a single person who has the rights to all profits and unlimited liability for all debts of the firm
The most common form of business organization in the U.S. is the sole proprietorship or proprietorship.

29. Sole Proprietorship-Advantages
The easiest form of business to start— few requirements
Decisions do not require approval from “higher ups.”
Keep all profits
Does not pay separate business income taxes; business is not a separate entity
Easy to get out of business
Psychological factor of being own boss

30. Sole Proprietorship-Disadvantages
Business owner is personally and fully responsible for all losses and debts of the business
Difficult to raise capital
Size and efficiency
Owner has unlimited liability.
May hire several employees to stay open
Cost of carrying minimum inventory
Often has limited managerial skills
Larger employers can offer more fringe benefits.
Limited life of business
Difficult to attract qualified employees
situation in which a firm ceases to exist when an owner dies, quits, or sells the business

31. Partnerships
Unincorporated business owned and operated by two or more people who share the profits and responsibility for debts
In a partnership, each partner fully shares responsibility for the operation of the business and all profits or losses.
Partnerships are the least numerous form of business organization in the United States.
A partnership has many of the same advantages and disadvantages of a sole proprietor.

32. Partnerships—Two Types
General partnership: form of partnership where all partners are equally responsible for management and debts
Limited partnership: form of partnership where one or more partners are not active in the daily running of the business and have limited responsibility for debts

33. Partnerships--Advantages
Ease of startup
Formal legal papers called articles of partnership are usually written.
Ease of management/varied expertise
Lack of special taxes
Easier to attract capital than a proprietorship
Easier to find good employees than a proprietorship
More efficient operations that come with increased size

34. Partnerships--Disadvantages
In a general partnership, each partner is responsible for acts of all partners.
In a limited partnership, limited partner loses original investment. General partners must make up the rest of the loss.
Limited life
Potential for conflict between partners

35. Corporations
Corporations are one of the most important forms of business and can easily raise large amounts of financial capital.
A corporation is a formal, legal entity all its own.
Individuals who wish to incorporate must file with the national government and state where the business will have its headquarters.

36. Corporations-Advantages
Ease of raising capital—sell more stock or issue bonds
The amount of money borrowed on a bond is called the principal.
Corporations pay interest on this borrowed money.

37. Corporations-Advantages
Owners have limited liability
Directors can hire professional managers to run daily operations.
Unlimited life
Ease of transferring ownership

38. Corporations-Disadvantages
Detailed records need to be kept for payment of taxes.
Double taxation of corporate profits
Difficulty and expense to get a corporate charter

39. Corporations-Disadvantages
Owners or shareholders have little voice in business operations.
Subject to more government regulations
Publicly held corporations must register with the federal Securities and Exchange Commission, established in 1934, to regulate the sale of stock.