study guide for test #3 Flashcards
1
Q
intrinsic incentive
A
motivated by a desire to want to do well without external reward
2
Q
extrinsic incentive
A
you get something tangible (being paid for grades)
3
Q
liability
A
to shield/protect yourself and family from wrong doing or failure (bank loans, lawsuit, etc.) if you have liability, the gov can not come to you PERSONALLY for wrong doings
Tax deduction
4
Q
chain
A
owned by corporations (Costco, Lowe’s, etc.)
5
Q
franchise
A
owned by individuals so it is more flexible (CFA)
6
Q
trade associations
A
non profit organizations that promote interest of particular industries
7
Q
labor unions
A
organized group of workers whose aim is to improve working conditions
8
Q
merger
A
when two firms legally join together to form a single, larger firm
9
Q
acquisition
A
the purchase by one firm of a controlling interest in another firm
10
Q
horizontal merger
A
the combo of two or more firms competing in the same market with the same good or service (at&t + verizon)
11
Q
vertical merger
A
two or more firms involved in different stages of producing the same good or service (tire company + car company)
12
Q
conglomerate
A
single business enterprise merging more than three businesses that make unrelated products
13
Q
separate legal entity (cooperation)
A
to separate personal finances or interests from corporate business liabilities
14
Q
unlimited personal liability
A
You are going to be responsible for business fallouts and legal action. Your finances are not protected.
15
Q
bond
A
Bonds are issued by the business in order for the business to make more money, and they pay off the loan with an interest rate attached.
15
Q
stock
A
Stocks can be bought by the public, and it allows a person to own a share of that co
16
Q
perfect competition
A
A market structure in which a large number of firms all produce the same product and no single seller controls supply or prices
17
Q
sole proprietorship
A
A business that is owned and run by a single owner.
18
Q
franchise
A
A franchise is a semi-independent business that pays a franchise fee to a parent company in return for exclusive rights to sell certain products in certain areas.
19
Q
chain
A
Chains are company owned businesses operate by the corporate headquarters with local managers having very little independence in running the business.
20
Q
natural monopoly
A
This is a monopoly that runs best whenever one large firm controls all of the outputs.
21
Q
economies of scale
A
This is when a firm’s start up costs are high and its average cost decreases with each additional unit produced.
22
Q
general partnership
A
everyone shares the business profits, debts, and liabilities
23
Q
limited partnership
A
people invests money in the business with no management responsibilities or liability.
24
Securities and Exchange Commission (SEC)
protects investors from corrupt corporations and unfair capital practices
25
regulatory capture
a form of government failure where a regulatory agency advances the commercial concerns of special interest groups within the sector the agency is supposed to be regulating. This causes the agency to care more about their concerns and not the general public.
26
perfect competition
A market structure in which a large number of firms all produce the same product and no single seller controls supply or prices
27
monopoly
a business/organization that controls one product/service (carnegie w steel)
28
monopolistic competition
occurs whenever companies sell products that are not identical but similar enough to be substituted as a good
29
perfect competition
multiple companies are selling the same product (produce)
30
negative externality
occurs when a cost outweighs the benefits
31
positive externality
occurs when the benefits outweigh the costs
32
price discrimination
This is when a company chooses the prices for certain groups. For instance, the difference in prices between an adult and child movie ticket is a result of this.
33
collusion
A collusion is an agreement between competitors to set prices at a certain point. It occurs whenever there is a cartel.
34
cartel
A cartel is an association by producers established to coordinate prices and production.
35
anti trust policies
These were created to ensure fair policies and competition in the marketplace.
36
market failure
Market failure occurs whenever a business has inefficient means of production and selling goods that leads to its fall. There would be no businesses to supply the certain products anymore.
37
non excludable goods
are for the public and anyone has the ability to use them
38
excludable goods
are private and can technically be purchased by anyone, but are not. An example of this is purchasing a ticket at the movie theatre.
39
income statement
An income statement shows a company's revenues, expenses and profitability over a period of time.
40
price makers
are responsible and able to set the prices for a product.
41
price takers
have to accept the price of the products depending on its marketplace.
42
insider trading
buying and selling of a security (stocks/bonds) while in the possession of material, non public information about the security
43
price controls
policies by which the gov sets the prices of an industry
44
predatory pricing
corporations intentionally lose money on something in order to break through competition and eventually raise the prices (dept of justice will tear them down)
45
interlocking directorates
people on multiple corporate boards
46
four barriers of monopolies
start up costs (cost to a new competitor in a given market is too much to get established)
exclusive access to a critical input (have to have their own means of production)
government protection (government can restrict the number of competitors in a given market)
unfair practices (creation of barriers that unfairly limit new competitors in the market)
47
separate legal entity
to separate personal finances or interests from corporate business liabilities
48
trade associations
non profit organizations that promote interest of particular industries
49
corporation
The type of business organization that has the highest amount of revenue
50
sole proprietorship
The type of business organization that is the most numerous
51
Why might a group of business owners decide to form a limited liability company rather than a corporation?
to avoid double taxation of profits
52
To start a sole proprietorship, each of the following is an important task to accomplish EXCEPT
sells of share of stock
53
Which of the following represent ownership in a corporation?
stocks ONLY
54
How do franchises and chains primarily differ?
Independent store owners have more power to make decisions in a franchise.
55
Which of the following are tax-exempt and do not pay federal or state income taxes?
non profit
56
A business firm that is itself a legal entity is a:
corporation
57
The typical structure of a large public corporation includes:
stockholders, board of directors and CEO.
58
Which of the following is considered to be an advantage of the corporate form of business organization?
limited liability for the stockholders
59
A ________________________ is a business owned by its members and operated to supply members and others with goods and services.
cooperative
60
unlimited liability
The term for being individually responsible and risking your personal assets when you operate a business is:
61
If two competing grocery stores in a town decide to merge and combine into one company, this would be an example of a:
horizontal merger
62
When a corporation issues and sells bonds it is:
borrowing money
63
A ___________________ occurs when tow firms join together to form a single, larger firm.
merger
64
Privately held corporations are not allowed to:
issue share of stock to outsiders
65
Companies, like GE and Walt Disney, that produce a wide variety of products would be examples of a:
conglomerate
66
Two sources of outside funding that a corporation has available that are not available to sole proprietorships or partnerships are:
Selected:
issuing and selling stocks and bonds
67
A _______________________ occurs when one firm purchases a controlling interest in another firm.
aquisition
68
What is the most likely reason that a large business firm would decide to form a conglomerate?
to help have consistent profits despite volatility within certain markets
69
A _________________ combines firms that operate at different stages in the production of a good.
vetical merger
70
The dollar value of capital used up due to aging and wear is called:
depreciation
71
Going global and becoming a _____________________________ offers new opportunities for growth for even the largest firms.
multinational corporation
72
A market in which high startup costs make it prohibitively expensive for more than one firm to operate is:
natural monopoly
73
When an unregulated monopoly replaces a perfectly competitive market, consumers typically:
pay higher prices
74
Imperfect competition is a term used to describe:
monopoly, monopolistic competition, and an oligopoly
75
A monopolist, like other firms, is interested in:
maximizing profit
76
Airlines charging a different price if a trip involves a Saturday-night stay, movie theaters charging children a different price than adults, and restaurants offering "early-bird" discounts to seniors are all examples of:
price discrimination
77
The most competitive market structure is:
perfect competition
78
exclusive access to a critical input and government protection are considered to be:
barriers to entry for monopolists
79
A market in which individual firms are price takers is:
perfectly competitive market
80
The least competitive market structure is:
monopoly
81
The term economists use to describe the nature of competition within a market is:
market structure
82
If, in the long run, an increase in output lowers a firm's average cost, the firm is experiencing:
economies of scale
83
Goods and services with distinguishing characteristics that set them apart are called:
differentiated products
84
A market in which many firms sell similar but not identical products is called:
monopolistic competition
85
collusion is
an agreement among competitors to work together.
86
How do consumers mostly benefit from monopolistic competition as compared to a perfectly competitive undifferentiated market?
increased choice
87
Due to the existence of a large number of similar, but not identical, substitutes in most communities, the market for barber shops is best considered:
monopolistic competition
88
In which of the following market structures are firms price makers?
monopoly and monopolistic competition
89
The market structure characterized by firms that have a collective incentive to collude, but an individual incentive to produce more than the quantity that is in the collective best interest is:
oligopoly
90
The market for which of the following industries is dominated by an international cartel?
oil
91
Which of the following best exemplifies an oligopolistic industry?
Two companies selling most of the peanut butter consumed around the world.
92
A group of firms that collude to monopolize a market is called:
cartel
93
In which of the following market structures do firms invest in brand loyalty?
monopolistic competition
94
Limits on prices established by the government for a product or service in a particular industry are called:
price controls
95
The body of law that has evolved to prevent firms from unfairly acquiring or using market power is called:
antitrust policies
96
Antitrust laws promote competition by:
making it illegal for firms to engage in a conspiracy to fix prices
II. blocking firms from merging together if the merger is likely to reduce competition and harm consumers.
III. prohibiting predatory acts that achieve or maintain market power.
97
The mere existence of a monopoly is:
NOT illegal
98
Antitrust lawsuits are enforced primarily by which agencies of the federal government?
Antitrust Division of the Department of Justice and the Federal Trade Commission.
99
What is the relationship between the Sherman Antitrust Act and the Clayton Antitrust Act?
The Clayton Antitrust Act strengthened the Sherman Antitrust Act.
100
Which of the following is a predatory act?
temporarily cutting prices to drive competitors out of business
101
Suppose that Sylvia Jones serves on the board of two competing breakfast cereal companies. This is an example of:
interlocking directories
102
Which factor mostly determines whether the U.S. federal government will seek to block a proposed merger?
likely price increases
103
What tactic did John D. Rockefeller use to gain control of the oil market?
buying up competing companies
104
Why did the Federal Trade Commission oppose the merger of Staples and Office Depot?
The merger was likely to unfairly hurt consumers
105
Which of the following best describes a rent-seeking activity?
lobbying for tax funds to subsidize corn farmers
106
The term economists use to describe a desirable spillover from the decisions of some people that affects the wellbeing of others is:
positive externality
107
The terms use to describe an undesirable spillover from the decisions of some people that affects the wellbeing of others is:
negative externality
108
The term economists use to describe the control of a regulatory agency by the industry it is supposed to regulate is:
regulatory capture
