economics chapter 9 & 10 – Flashcards
Unlock all answers in this set
Unlock answersquestion
proprietorship
answer
a form of business in which there is one owner
question
unlimited liability
answer
the concept that an owner's personal assets can be used to pay bills of the business
question
partnership
answer
a type of business organization in which there are two or more owners
question
partnership agreement
answer
a legally binding document that specifies how the responsibilities and profits or losses from a partnership will be split between the partners
question
corporation
answer
an organization of people legally bound together by a charter to conduct some type of business
question
articles of incorporation
answer
a written application to the state requesting permission to form a corporation
question
charter
answer
the legal authorization to organize a business as a corporation
question
stock
answer
shares of ownership in a corporation
question
limited liability
answer
the concept that owners of a business are only responsible for its debts up to the amount they invest in the business
question
dividends
answer
that part of a corporation's income paid to its stockholders
question
test of the market
answer
being able to provide goods that satisfy consumers' needs and desires at prices consumers are willing to pay
question
multinational business
answer
a firm that sells and produces products in multiple countries
question
nonprofit organization
answer
an organization that does not have profit as its objective
question
franchise
answer
a contract between a parent company (franchisor) and some other business or individual (franchisee) that details the terms under which the franchisee does business with products, names, or other services of the franchisor
question
line of credit
answer
an arrangement through which a business can quickly access needed cash from a bank
question
bond
answer
a certificate stating the amount the corporation has borrowed from the holder and the terms of repayment
question
interest
answer
the payment for using some else's money
question
common stock
answer
a type of stock that gives the holder a partial ownership of the corporation
question
merger
answer
the combining of one company with another company it buys
question
horizontal merger
answer
a merger of two companies in the same industry
question
conglomerate merger
answer
a merger of two companies that are in different businesses
question
vertical merger
answer
a merger of two companies that are at different stages in the same production process
question
conglomerate
answer
a firm made up of many divisions and/or subsidiaries that may not have much in common in their lines of business
question
market organization
answer
the way participants in markets are organized and how many participants there are
question
price taker
answer
a firm that takes a price determined by forces outside the firm's control
question
price setter
answer
a firm that has some control over the price at which its product sells
question
perfect competition
answer
a form of market organization in which a great many small firms produce a homogeneous product
question
homogeneous product
answer
a good or service that varies little from producer to producer economic profit - total revenue minus total costs
question
monopoly
answer
a form of market organization in which there is only one seller of a product
question
economic profit
answer
total revenue minus total costs
question
natural monopoly
answer
a situation in which it is not practical to have competition
question
patent
answer
a legal protection for the inventor of a product or process that gives that person or company the sole right to produce the product or use the process for up to 17 years
question
three forms of business
answer
proprietorships partnerships corporations
question
in a proprietorship the owner and the business are
answer
one and the same
question
advantages to a proprietorship
answer
easy to start little government regulation profits may stay with owner pride of ownership complete control lower taxes
question
disadvantages to a proprietorship
answer
unlimited liability limited life of the business difficult to raise money risk of loss is not shared
question
each person involved in a partnership agrees to provide some portion of the
answer
work and start-up money and then share the profits or losses
question
often a partnership is formed by one person who has the
answer
skill to run the business and another who has the money to start it.
question
taking on partners is often how a proprietorship
answer
grows
question
each new partner brings something to the business
answer
and shares in the good or bad fortune of the firm
question
the partners in a partnership must agree on their respective responsibilities and
answer
on how the profits or losses from the business will be split between them
question
this is done in a partnership agreement
answer
that becomes a legally binding document
question
this agreement lasts for the life of the partnership unless
answer
the partners agree to make changes
question
a lawyer present when writing the partnership agreement
answer
is a good idea but not necessary
question
advantages to a partnership:
answer
easy to start little government regulation not difficult to raise funds combination of skills
question
disadvantages to a partnership:
answer
unlimited liability profits are shared limited life of business disagreements
question
a corporation is a legal entity
answer
separate from its owners
question
the types of business a corporation can participate in are determined by the
answer
articles of incorporation
question
if the articles of incorporation satisfy state and federal laws,
answer
a charter will be issued and the corporation becomes a legal entity
question
shares of ownership in a corporation are called
answer
stocks
question
more than 2 million corporations
answer
exists in the US
question
advantages to a corporation:
answer
easy to raise funds limited liability unlimited life specialized management risks are shared
question
disadvantages to a corporation
answer
difficult to start less direct control double taxation limited activities
question
in our economy we depend a great deal on the private sector
answer
to produce goods and services
question
more than 80% of our total production
answer
comes from the private sector
question
private businesses are guided by
answer
supply and demand
question
all firms (large and small) must satisfy the
answer
test of the market
question
in recent years, about 90,000 business failures have resulted because
answer
firms fail the test of the market
question
when shopping you see more
answer
corporations
question
our economy often is dominated by
answer
very large businesses
question
yet there exist more
answer
small firms than large ones
question
percent of proprietorships
answer
74% of companies
question
percent of corporations
answer
18% of companies
question
percent of partnerships
answer
8% of companies
question
since 1960, these portions have
answer
been almost the same
question
if you look at sales rather than the number of firms
answer
proprietorships and partnerships apear much less important
question
the sales of all corporations are measured in
answer
trillions of dollars in the US
question
that would equal about
answer
$43,000 per person
question
for these 20 corporations, sales represent more than
answer
$4,000 per person in the US
question
these firms employed a total of
answer
4,456,400 people
question
that is more than
answer
3% of the US labor force
question
the world of business today is the
answer
entire world
question
many businesses inside the US sell and produce
answer
products in markets around the globe
question
the concept of selling to other countries has become
answer
broader and the terms of multinational business or global business are more common than international business
question
US companies that are multinational:
answer
Coca-Cola; General Motors; KFC; & Whirlpool
question
non-US companies that are multinational:
answer
toyota; honda; BMW; mercedes
question
there is another type of organization
answer
a nonprofit organizations
question
a franchise is a contract between a parent company (franchisor) and some other business or individual (franchisee) that details
answer
the terms under which the franchisee does business with products, names, or other services of the franchisor
question
three types of franchise operations:
answer
1. retail franchise granted by a manufacturer (automobile dealerships) 2. wholesale franchise granted by a manufacturer (Coca-Cola) 3. service-sponsored retail franchises (gas stations & restaurants)
question
about 40% of all franchises are
answer
restaurants or gas stations
question
all types of business firms find at times that they need to have access
answer
to more money than they have on hand
question
three reasons for needing money:
answer
1. get the business going 2. help run the business when sales revenue is low 3. help the company merge with another company
question
to understand the workings of a market economy, you need to know how firms are
answer
organized with respect to each other
question
there are fours types of market organizations:
answer
1. perfect competition 2. monopolistic competition 3. oligopoly 4. monopoly
question
the market organizations are defined by five characteristics:
answer
1. number of firms 2. type of product sold 3. ease of entering or leaving the industry 4. amount of information about the market 5. degree on price control
question
the most important defining characteristic of markets is
answer
the number of firms selling in the market
question
in some ways, perfect competition is held as
answer
an ideal form of market organization
question
agriculture is an industry that
answer
comes close to perfect competition
question
perfect competition in terms of the five characteristics of market organizations
answer
1. great many sellers 2. homogeneous product 3. complete freedom to enter or leave the industry 4. perfect information about the market 5. no price control
question
a monopoly is a form of market organization in which there
answer
is only one seller of a product
question
monopoly in terms of the five characteristics of market organizations
answer
1. single seller 2. unique product 3. very difficult to enter of leave the industry 4. complete information about the market 5. great deal of price control
