Market Structure Review Perfect Comp Monopolistic Comp Oligopoly

Market Structure Review Perfect Comp. Monopolistic Comp. Oligopoly Monopoly # of Firms Many, Many A few dominate One Variety of goods None Some-Similar Some but not identical None Control over prices None Little Some Complete Barriers to entry None Low High Complete Examples Wheat, Corn, Paper Jeans, Pizza Cars, Movies Public water

Sole-Proprietorship Definition: A business owned and managed by a single individual. 75% of businesses are sole-proprietorship. Advantages: all firms profits –full control of business. Disadvantages: Earns Responsible Easy Unlimited Few start-up regulations Easy to discontinue for all firms debts—High risk. Limited Lack personal liability access to resources of permanence

Partnership Definition: Business owned by two or more people who agree on specific division of responsibilities and profits. Advantages Disadvantages Potential conflict between partners Shared decision making (responsibility shared) Unlimited Liability –Unless its an LLP Larger pool of capital (start-up costs) High risk with decision making Easy start-up Little government regulation

Corporation- Legal entity owned by individuals stockholders who each bear limited liability for the firm’s debts. Stock- certificate of ownership in a corporation Publicly held corporation- stockholders can buy and sell shares of the firm on the open market

ADVANTAGES TO INCORPORATION Limited liability Long life of business Easy to transfer ownership Ability to attract capital & specialists/various experts

DISAVANTAGES OF INCORPORATION Difficulty & expense of start-up Double taxation- govt. considers firm separate from owners- must pay on income too Loss of control More regulation

Franchise Franchise—a semi-independent business that has exclusive use of name (brand), product or service in a specific area. Examples: Mc. Donalds 7 -Eleven Dairy Queen.

Advantages/ Disadvantages of a Franchise Advantages Management training and support Standardized quality Disadvantages High franchising fees/royalties (share of earning) National advertising programs Strict operating standards Financial assistance Purchasing restrictions Centralized buying power Limited product line

Cooperative —business is owned and controlled by those who use its services. Profits generated by the coop are distributed among the members. Examples: Food Co-ops Credit Unions

Nonprofit Organization —operate with a goal of helping society/members rather than earning profits for owners. Examples American Red Cross ACLU Doctors without borders

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