1. Business Terms

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

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