MARKET STRUCTURES &
BUSINESS ORGANIZATIONS
By: Leanne Huynh & Tory Lynde
Economics
Alvarez (5)
SOLE PROPRIETORSHIP
•
A business owned and managed by a single
individual.
That person earns all of the firm’s profits and is
responsible for all of the firm’s debts.
• Most popular in the United States.
•
ADVANTAGES & DISADVANTAGES
Ease of Start-Up
 Few Regulations
 Sole Receiver of Profit
 Full Control
 Easy to Discontinue

Unlimited Personal
Liability
 Limited Access to
Resources
 Lack of Permanence

PARTNERSHIPS
•
A business organization owned by two or more
persons who agree on a specific division of
responsibilities and profits.
General Partnership – partners share equally in both
responsibility and liability.
• Limited Partnership – only one partner is required to
be a general partner.
• Limited Liability Partnerships – all partners are
limited partners.
•
ADVANTAGES & DISADVANTAGES
Ease of Start-Up
 Shared Decision
Making and
Specialization
 Larger Pool of Capital
 Taxation

Unlimited Liability
 Potential for Conflict

CORPORATIONS
•
A legal entity owned by individual stockholders,
each whom faces limited liability for the firm’s
debts.
Closely Held Corporations – issues stock to only a few
people, often family members.
• Publicly Held Corporations – sells stock on the open
market.
•
ADVANTAGES & DISADVANTAGES OF
INCORPORATION
Limited liability for
owners
 Transferable
ownership
 Ability to attract
capital
 Long life

Expense and difficulty
of start-up
 Double taxation
 Potential loss of
control by the
founders
 More legal
requirements and
regulations

PERFECT COMPETITION
•
•
a large number of firms that all produce the same
product.
Four Conditions:
Many buyers and sellers participate in the market
• Sellers offer identical products
• Buyers and sellers are well informed about products
• Sellers are able to enter and exit the market freely
•
HORIZONTAL MERGERS

Joining two or more firms competing in the same
market with the same good or service.
Combined yogurt
company.
VERTICAL
MERGERS
 Combining
two
or more firms
that are
involved in
different stages
of producing the
same good.
FRANCHISES
Large companies sell franchises, or contracts that
give a single firm the right to sell their product in
an exclusive area.
 Ex) NFL teams, fast food, restaurants in state
parks, hotels.

MULTINATIONAL CORPORATIONS


Corporations that operate in more than one
country at a time.
Disadvantages
Could negatively influence culture/politics
 Some MNCs have low wages and poor working
conditions


Advantages
Provide jobs world wide.
 Spread new technologies

COOPERATIVE ORGANIZATIONS

Cooperative: Business organization owned and
operated by a group of individuals for their
shared benefit.
Service
Consumer
Producer
NON-PROFITS

An institution that functions much like a
business, but does not operate for the purpose of
generating profits.
MONOPOLY
•
A market structure with only one seller of a
particular economic product that has no close
substitutes.
Natural Monopoly – costs are minimized by having a
single firm produce the product.
• Geographic Monopoly – no other business in the area
offers competition.
• Technological Monopoly – the special privileges given
to those who invent a product or process. (i.e.
copyright or patent)
•
OLIGOPOLY
•
A market structure in which a few large firms
dominate a market.
Few firms dominate
• Some variety of goods
• Some control over prices
• High barriers to entry
•
MONOPOLISTIC COMPETITION
•
•
A market structure in which many companies
sell products that are similar but not identical.
Four Conditions:
Many firms
• Few artificial barriers to entry
• Slight control over price
• Differentiated Products
•