1. The Business Organization
Chapter Eight

2. Focus of Chapter Eight Organizational / Business Structures
The Nature of Economic Costs
Short-Run Production and Costs
Long-Run Production and Costs

3. The Business Sector What is a Plant?
A physical establishment that functions to produce, fabricate, and distribute goods and services (mine, factory, warehouse, store).

4. What is a Firm and Industry?
A firm is a business organization that owns and operates plants. Some firms operate only one plant, others operate many.
An industry is a group of firms that produce the same or similar products, resources, or services.

5. Horizontal, Vertical, or Conglomerate?
Horizontal firms have several plants performing the same function (Cineplex).
Vertically integrated firms have many plants performing various functions in the production process. From resource extraction to sales (George Weston Ltd).
Conglomerates operate in different industries (Bell).

6. The Legal Forms of Business
Sole Proprietorship: A business owned and operated by one person (Clarke Mortgages and Financial Consulting).
Partnership: A business owned and operated by two or more people (Gael Properties).
Corporation: An incorporated legal entity chartered by the provincial or federal government that operates as a business distinct from its owners (Apple).

7. Advantages & Disadvantages of: a Sole Proprietorship
Easy to Set-Up
Substantial Freedom
Strong Incentives
Disadvantages
Limited Resources
Limited Specialization
Unlimited Liability

8. Advantages & Disadvantages of: a Partnership
Easy to Set-Up
Greater Specialization
More Resources
Disadvantages
Susceptible to Inaction
Resources Limited to the partners
Precarious Continuity
Unlimited Liability

9. Advantages & Disadvantages of: a Corporation
Easy Raising Money (Stocks and Bonds)
Many participants
Easy Change of Owners
Limited Liability
Outlive Owners
Disadvantages
Legal Expenses
Social Consequences
Double Taxation (both corporate tax and owners taxed on their dividends)

10. The Legal Forms of Business and Becoming a Shareholder
Vintage University Video on the Topic from the 1940s.
Pay special attention to the definitions and how a corporation is formed.

11. Principal-Agent Problem
A conflict of interest can exist when the managers and workers (agents) within a business are disconnected from the owner or principals and their goals.
Picture a large corporation with thousands of owners. The employees and managers often have different goals than the owners, and this can manifest itself in many different ways.

12. Test Preparation
Questions 1 & 2 on Page 210.