Types of Businesses

SOLE PROPRIETORSHIPS AND PARTNERSHIPS

WHY DO YOU THINK MARY KAY ASH PROVED SO SUCCESSFUL IN HER COSMETICS VENTURE?

• BECAUSE–Entrepreneurial skills–Innovation in sales

techniques and incentives

Sole ProprietorshipsAdvantages

• Easy to open and close

• Few regulations• Freedom and

control• Owner keeps Profit

Disadvantages

• Limited funds• Limited life• Unlimited

liability

Why are sole proprietorships the most common form of business organization in the US?

• Easy to start up• Full control• Relative freedom from regulation• Ability to leave the business at any time• All profits to the sole proprietor

PartnershipsAdvantages

• Easy to open and close

• Few regulations• Access to resources• Joint Decision

Making• Specialization

Disadvantages

• Potential for conflict

• Limited life• Unlimited

liability

What do stocks and dividends have to do with corporations?

Stocks are sold to people (shareholders) and those shareholders receive a dividend or check at the end of the year containing a percentage of the corporations profits.

CorporationsAdvantages

• Access to Resources

• Professional Managers

• Limited Liability• Unlimited Life

Disadvantages• Start-Up Cost

and Effort• Heavy Regulation

• Double Taxation• Loss of Control

Perfect Competition &

Monopolies

CHARACTERISTICS OF PERFECT COMPETITION

MANY BUYERS & SELLERSEnsures no one controls

prices

STANDARDIZED PRODUCTSAll products are the same

WELL-INFORMED BUYERS/SELLERS

So they know market prices & other conditions

FREEDOM TO ENTER & EXIT MARKET

No interference

INDEPENDENT BUYERS & SELLERS

They do not band together to influence prices

Who is the man in the cartoon? JOHN D. ROCKEFELLER

What is the message of the cartoon? ROBBER BARONS CONTROLLED THE GOVERNMENT

What industry did he have a monopoly in? OIL

CHARACTERISTICS OF A MONOPOLY

ONLY ONE SELLERWho controls supply of a

product with no close substitutes

CONTROL OF PRICES

RESTRICTED, REGULATED MARKET

Gov’t. regulations or other barriers keep other firms

out of the market

formal organization of sellers or producers that agree to act together to set prices and limit output

CARTEL

OPEC:

ORGANIZATION OF THE PETROLEUM EXPORTING COUNTRIES

Equador

VenezuelaNigeria

LibyaAlgeria

IraqIran

KuwaitSaudi Arabia

IndonesiaAngola

OPEC:

•Control 2/3’s of the world’s oil•Have a sort of monopoly on oil•Try to control prices by controlling supply•Not always successful in controlling supply because member nations do not want to limit their profits

Have OPEC nations increased the price that they charge for oil in the last few years? How do you know this? (How are we affected by oil prices?)

YES BECAUSE GAS PRICES HAVE GONE UP.

What situations are currently affecting gas prices?MIDDLE EAST CONFLICTS, ECONOMIC CRISIS, INCREASED DEMAND DUE TO LARGE VEHICLES

Get a textbook and turn to page 200 and work on the OPEC section. Then continue as far as you can in the packet.

In what ways does OPEC act like a monopoly?

What will happen to OPEC’s power as new sources of energy are discovered?

THEY CONTROL HOW MUCH OIL FLOWS THROUGH THEIR PIPELINES, CONTROLLING

SUPPLY AND THEREFORE, PRICE.

THEY WILL LOSE THEIR POWER.

Monopolistic Competition• MANY BUYERS AND SELLERS

• SIMILAR BUT DIFFERENTIATED PRODUCTS• LIMITED CONTROL OF PRICES

• FREEDOM TO ENTER OR EXIT THE MARKET

Oligopoly• FEW SELLERS MANY BUYERS

• STANDARDIZED PRODUCTS FOR INDUSTRY; DIFFERENTIATED PRODUCTS FOR

CONSUMERS• MORE CONTROL OF PRICES

• LITTLE FREEDOM TO ENTER OR EXIT THE MARKET