Economics Unit 3 Test Questions – Flashcards
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business organization
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an establishment formed to carry on commercial enterprise
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sole proprietorship
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a business owned and managed by a single individual; earns all of firm's profits and is responsible for all of the firm's debt
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advantages of sole propiertorship
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ease of start-up, relatively few regulations, sole receiver of profit, full control, easy to discontinue
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steps to start a new business: SP
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1. Authorization; business license 2. site permit 3. business name
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business license
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authorization to start a business issued by the local government
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zoning laws
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law in a city or town that designates separate areas for residency and for business (prohibit sole propietors from operating business outside of the house)
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liability
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the legally bound obligation to pay debts
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disadvantages of sole propietorship
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unlimited personal liability, limited access to resources, lack of permanence
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fringe benefits
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payment other than wages or salaries
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partnership
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a business organization owned by two or more persons who agree on a specific division of responsibilities and profits
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general partnership
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partnership in which partners share equally in both responsibility and liability
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limited partnership
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partnership in which only one partner is required to be a general partner; other partner only gives money--the only thing they lose is their original investment; advantage of being the general partner is control of business
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limited liability partnership (LLP)
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partnership in which all partners are limited partners; all partners are limited from personal liability in certain situations (like mistakes); attorneys, physicians, dentists, accountants
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advantages of partnerships
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ease of start-up, shared decision-making and specialization, larger pool of capital, taxation
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disadvantages of partnerships
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unlimited liability, potential for conflict
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articles of partnership
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a partnership agreement; spells out each partner's rights and responsibilities, outlines how partners will share profits or losses; also can address how new partners can join the firm, duration of the partnership, and tax responsiblities
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uniform partnership act (UPA)
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act ordering common ownership interests, profit and loss sharing, and shared management responsibilities in a partnership
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assets
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money and other valuables belonging to an individual or business; improve firm's ability to borrow funds for operations or expansion
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corporation
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a legal entity owned by individual stockholders
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stock
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a certificate of ownership in a corporation; makes you a part-owner of corporation
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closely held corporation
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corporation that issues stock to only a few people, often family members, aka privately held corporation
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publicly held corporation
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corporation that sells stock on the open market
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advantages of incorporation
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limited liability for owners, transferable ownership, ability to attract capital, long life
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advantages for stockholders
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limited liability, flexibility, stocks can be sold
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advantages for the corporation
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more potential for growth, can sell bonds, can hire experts, long life, stock is transferable
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disadvantages of incorporation
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expense and difficulty of start-up, double taxation, potential loss of control by the founders, more legal requirements and regulations
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bond
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a formal contract to repay borrowed money with interest at fixed intervals`
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certificate of incorporation
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license to form a corporation issued by state government, application includes: the corporate name, statement of purpose, length of time that the business will run, founders' names and addresses, headquarters' business address, method of fund-raising, the rules for the corporation's management
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double taxation
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corporations must pay taxes for income
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dividend
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the portion of corporate profits paid out to stockholders; stockholders must pay personal income tax on these
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horizontal merger
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the combination of two or more firms competing in the same market with the same good or service; such as two automobile companies; companies would merge if the result would be economies of scale or improve efficiency
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vertical merger
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the combination of two or more firms involved in different stages of producing the same good or service; a vertical merger combined can control all phases of production; concern for antitrust regulators; can lessen competition
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conglomerate
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business combination merging more than three businesses that make unrelated products
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multinational corporation (MNC)
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large corporation that produces and sells its goods and services throughout the world; must obey laws and pay taxes in each country in which they operate
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advantages of multinationals
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benefit consumers and workers worldwide by providing jobs and products around the world; spread technologies and production methods across the globe; help poorer nations gain better living standards for their people
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disadvantages of multinationals
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influence the culture and politics in the countries in which they operate; low wages and poor working conditions
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business franchise
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a semi-independent business that pays fees to a parent company in return for the exclusive right to sell a certain product or service in a given area
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advantages of franchises
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built-in reputation; management training and support; standardized quality; national advertising programs; financial assistance; centralized buying power
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disadvantages of franchises
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high franchising fees and royalties; strict operating standards; purchasing restriction; limited product line
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royalty
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share of earnings given as payment
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cooperative
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a business organization owned and operated by a group of individuals for their mutual benefit; three main categories: consumer(purchasing cooperatives), service cooperatives; produces cooperatives
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consumer cooperatives
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retail outlet owned and operated by consumers; sell merchandise to their members at reduced prices; price clubs, book club, housing co-ops; membership fees or members must work a small number of hours per year
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service cooperatives
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cooperative that provides a service, rather than a good; discounted insurance, banking services, health care, legal help, babysitting
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producer cooperatives
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agricultural marketing cooperative that helps member sell their products
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nonprofit organization
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institution that functions much like a business, but does not operate for the purpose of generating profits; museums, public schools, American Red Cross, hospitals, adoption agencies, churches, YMCA; exempted from income taxes, operate with partial government support
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professional organization
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nonprofit organization that works to improve the images, working conditions, and skill levels of people in particular occupations; National Education Association, American Medical Association, etc. ; helps keep up-to-date on industry trends, help identify and follow codes
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business association
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nonprofit organization that promotes collective business interests for a city, state, or other geographical area for a group of similar businesses; must address codes of conduct; aims to protect consumers by promoting an ethical and fair marketplace
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trade associations
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nonprofit organization that promotes the interests of a particular industry
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labor force
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all nonmilitary people who are employed or unemployed
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The Bureau of Labor Statistics
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provides answers two important questions: how many people are in the work force? how many are employed and unemployed at any given time?
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learning effect
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theory that education increases productivity and results in higher wages; college graduations earn more than high-school dropout
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screening effect
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the theory that the completion of college indicates to employers that a job applicant is intelligent and hard-working
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contingent employment
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a temporary or part-time job
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derived demand
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demand that is determined by demand for another good or service
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productivity
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value of output
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equilibrium wage
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the wage rate that produces neither an excess supply of workers nor an excess demand for workers in the labor market
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unskilled labor
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labor that requires no specialized skills, education, or training; dishwashers, janitors
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semi-skilled labor
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labor that requires minimal specialized skills and education; lifeguards, some construction workers
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skilled labor
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labor that requires specialized skills and training; bank tellers, auto mechanics, firefighters, chefs, carpenters
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professional labor
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labor that requires advanced skills and education; teachers, doctors, bankers, manages, actors, professional athletes, lawyers,etc.
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glass ceiling
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the unofficial, invisible barrier that prevents women and minorities from advancing in businesses dominated by white men
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Fair Labor Standards Act
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1938, Congress passed this law to establish minimum wage (lowest amount employers could lawfully pay for most types of work, requires employers to pay overtime for work that exceeds 40 hours weeks)
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labor union
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an organization of workers that tries to improve working conditions, wages and benefits for its memebers
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featherbedding
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the practice of negotiating labor contracts that keep unnecessary workers on a company's payroll
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strike
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an organized work stoppage intended to force an employer to address union demands
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right-to-work laws
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a measure that bans mandatory union membership
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blue-collar worker
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someone who works in an industrial job, often in manufacturing, and who receives wages
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white-collar worker
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someone in a professional or clerical job who usually earns a salary
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collective bargaining
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the process in which union and company representatives meet to negotiate a new labor contract; wages and benefits, working conditions, job security
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mediation
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a settlement technique in which a neutral mediator meets with each side to try to find a solution that both sides will accept
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arbitration
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a settlement technique in which a third party reviews the case and imposes a decision that is legally binding for both sides
