Business Types and Market Structure
Ex: doctors, skilled craftsmen, lawyers, these kinds of people are in a business on their own.
Pros: easy to form, control profits, flexibility, smaller taxes.
Cons: fragile business existence, less of a professional appearance, unlimited liability
Ex: Toyota, Microsoft, Verizon, these companies all sell stocks on the open market that the public can invest in.
Pros: Financial benefit from going public, access to capital markets, liquidity strategy, stock as currency.
Cons: Myopic outlook, expensive paperwork, loss of control
Ex: If you wanted to have your own McDonald’s restaurant you would have to join a franchise, same for a clothing store, and a technology store. These companies are a franchise because they are large businesses, and you need a franchise to have one of your own.
Pros: Established Brand and Customer Base, Marketing Support, Financial Assistance
Cons: Initial Payout (Franchise Fee and Start-up Costs, Limited Creativity/Flexibility, Locked into Operation by Long-Term Contract
Ex: lawyers, accountants and doctors. These are partnerships because two or more people have around 50% control over the business that they own in partner to someone else who usually owns the other half of the company.
Pros: ab;e to collaborate with different people collectively to create great ideas
Cons: have to share the power if the company and the profit.
Ex: street vendors, agricultural markets and internet industries. These businesses have perfect competition because there are several similar things being sold and have competing prices.
Pros: There is no information failure as all knowledge is spread out evenly, Maximum consumer surplus and economic welfare
Cons:No Scope for economies of scale because of the high number of firms in there, Undifferentiated products- all homogeneous. Important in industries like clothes and cars
Ex: Dell, Albertson’s, Fedeilty investments. These businesses privately sell stocks because they are a private corporation.
Pros: By going public, the company will improve its financial condition by obtaining money that does not have to be repaid. The company obtains increased prestige and visibility.
Cons: When a company goes public, management loses some of its freedom to act without board approval and approval of a majority of the shareholders in certain matters. Shareholders tend to judge management in terms of profits, dividends and stock prices. This can cause management to emphasize short-term strategies rather than long-term goals.
Ex: Dairy farms, farms and food co-ops. These type of businesses are cooperative because they are owned by people that use its services.
Pros: The main advantage of purchasing a co-op is that they are often cheaper to buy than a condo.
Co-ops are typically more financially stable.
The instance of foreclosure is rare.
Co-ops are typically going to be a higher owner occupancy rate.
Cons: Most co-ops require a 10 to 20 percent down payment.
The rules for renting your co-op are often quite restrictive.
Because there are a limited amount of lenders who do co-op loans, your loan options are restricted.
Ex: diamonds, Technological, Geographic, Government Monopoly. These fit into the category of monopoly because some services and goods are only sold from one company.
Pros: They funnel a high level of profits back to shareholders and local communities. It changes the economies of scale.
Cons: They limit competition, which means prices don’t have to be lowered. Quality doesn’t have to be maintained.
Ex: US auto industry, steel industry, gas. These examples represent oligopoly because these companies dominate more than 70% of the industries total output
Pros: Since companies in an oligopolistic market have full control over it, they are capable of deciding prices as per their choice. Though this practice is illegal, it works in favor of these businesses.
Dominant market players usually make long-term profits in an oligopolistic environment
Cons: Setting of prices may be advantageous for the firms, but if done unrealistically, it may prove to be a great disadvantage for consumers.
Creative ideas or plans of small businesses in the oligopolistic market fail to realize because they cannot overcome the control of major market players.
Ex: Fast food restaurants, coffee shops, soda types. These are monopolistic competition because the products these companies make are similar but have some differences.
Pros: Because a good is always priced higher than its marginal cost, a monopolistically competitive market can never achieve productive or allocative efficiency. Suppliers in monopolistically competitive firms will prod. Differentiation Brings Greater Consumer Choice and Variety
Cons: They Can be Wasteful — Liable of Excess Capacity, Allocatively Inefficient
Ex: Postal service, telephone service, water service. These services represent legal monopoly because one provider of the service can be used in rural areas
Pros: not many firms in the industry
Cons: little to no innovation
Ex:Human Right Campaign, Red Cross, Denver Rescue Mission. These services represent a organization that helps people meet specific tax-exempt purposes
Pros: Tax exemption/deduction, Eligibility for public and private grants.
Cons: Costs, paperwork,
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