2.  The Free Enterprise System encourages individuals to start and operate their own businesses with little to no government involvement

3.  Entrepreneur - a person who organizes and manages a business, usually with considerable initiative (self-effort, hardwork) and risk.  Risk – potential (possible) loss or failure  Profit - the money earned from conducting business after all costs and expenses have been paid

4.  Competition - the struggle (fight) between companies for customers

5.  Price Competition - focuses on the sale price of a product  Non-price Competition - such things as quality of the product, service and location are important here

6. Supply - the amount of goods producers are willing to make and sell Demand - consumer willingness and ability to buy products

8.  Surplus - this happens when supply exceeds (is more than) demand  Shortage - this happens when demand exceeds (is more than) supply  Equilibrium - the amount of product supplied is equal to the amount of product demanded

9. Imports - goods and services purchased from other countries Exports - goods and services sold to other countries  Trade Surplus - this happens when a country exports more goods and services than it imports.  Trade Shortage (Trade Deficit) - this happens when a country imports more goods and services than it exports.

11.  Service Businesses – provide needed services for a fee  Merchandising Businesses - buy finished products and resale them to individuals or other businesses  Manufacturing Businesses – buy raw materials such as wood or iron ore and transform them into finished products. They then resale the finished products to individuals or other businesses

13.  Sole Proprietorships – a business owned by one person  Partnerships - a business owned by two or more persons called partners  Corporations - a business recognized by law as having a life of it’s own. Must get special permission (Charter) from the government to operate.

14.  easy to start up  full control of the business by the owner  exclusive rights to profits by the owner

15.  unlimited liability by the owner  sole responsibility of the owner to operate the business  limited growth potential for the business  lack of longevity of the firm

16.  easy to form  allow specialization  lets partners share decision making  shares business losses between partners

17.  unlimited liability by partners  potential for conflict among partners  lack of business longevity

18.  General partnerships: ◦ Partners have equal decision-making authority. ◦ Each partner has unlimited liability.  Limited partnerships: ◦ Partners join as investors. ◦ Partners have in inactive role in decision making. ◦ Partners have limited liability.

19.  Submit an application for the articles of incorporation and obtain a corporate charter.

20.  limited liability  separation of ownership from management  ease of raising capital  longevity

21.  costly and difficult to obtain a corporate charter  number of government regulations to follow  slow decision-making process

22. The Supreme Court of the United States (of America) Appeals Court Process

25.  Corporations have a life of their own  Corporations have a right to free speech  Corporations can give unlimited funds (money), for political election ads

26.  Franchise - a business method that involves licensing of trademarks and methods of doing business, such as: ◦ Chain store, retail outlets which share a brand and central management ◦ An exclusive right, for example to sell branded merchandise

27.  Licensing Agreement - protects the originator’s name and product(s)

28.  A business owner can reduce the overall costs associated with starting a business because: ◦ employee training is often provided by parent company ◦ advertising is sometimes paid for by parent company ◦ it can use the parent company’s name

29.  Intellectual Property (IP) - a term referring to a creator’s exclusive rights to a variety of intangible assets, such as musical, literary, and artistic works; discoveries and inventions; and words, phrases, symbols, and designs.

30.  A brand is a name used to identify and distinguish a specific product, service, or business.

32.  A trademark or trade mark is a distinctive (special) sign used by an individual or business to identify that the products or services come from a unique source, and to distinguish its products or services from those of others.

35.  Patent -a right granted to anyone who invents or discovers any new and useful process, machine, article of manufacture, or composition of matter, or any new and useful improvement to the above.  Length of patent: 14 – 20 years (depending upon on thing being patented)

38.  Copyright - is the exclusive right granted to the author of an original work, including the right to authorize or ban the publication, distribution and adaptation of that work. Copyright only lasts for a certain time period after which the work is said to enter the public domain  Length of copyright: Life of author + 70 yrs.