5-2 review: costs of production -...
Post on 10-Mar-2018
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1. The level of production at which a
business realizes its greatest amount
of profit is: where MC=MR
8. Define monopoly.
• Market structure in which only one seller
sells a product for which there are no
close substitutes
9. Explain how prices of goods/services
are affected by a monopoly.
• Business is a price maker and consumers
accept that price
10. Define natural monopoly.
• Occurs when the costs of production are
lowest with only one producer
11. Define technological monopoly.
• Occurs when a firm controls a
manufacturing method, an invention, or a
type of technology
12. Define economies of scale.
• When the average cost of production falls
as the producer grows larger
13. Explain what nonprice competition is
and give an example.
• Anything other than lowering price such as
advertising or giveaways
14. Name the 4 characteristics of
monopolistic competition.
– Many sellers and many buyers
– Similar but differentiated products
– Limited control of prices
– Freedom to enter or exit the market
15. Name the 2 types of products an
oligopolist is likely to sell.
• Standard AND differentiated products
16. Explain the purpose of antitrust
legislation.
• To breakup companies (monopolies) that
have become too large
19. Name the 4 characteristics of
oligopolies.
– Few sellers and many buyers
– Standardized or differentiated products
– More control of prices
– Little freedom to enter or exit market
20. Name the 5 characteristics of perfect
competition.
– Numerous buyers and sellers
– Standardized product
– Freedom to enter and exit markets
– Independent buyers and sellers
– Well-informed buyers and sellers
21. In monopolistic competition how do
sellers attract consumers?
• Product differentiation and nonprice
competition
22. You want to start your own smoothie
store located in a nearby mall. This is
an industry where monopolistic
competition exists. Explain in detail
how you would make your business a
success according to the following
factors: product differentiation,
nonprice competition, prices, and
expenses.
1. Define business organization.
• Enterprise that produces goods or
provides services in order to make a profit
2. Why can partnerships have limited
life?
• When a partner dies, retires, or leaves, the
partnership ends
3. Name the advantages of a sole
proprietorship.
–Easy to open and close
–Few regulations when compared to
other types of businesses
–Freedom and control
–Owner keeps profits
6. Define limited partnership.
• Partnership in which 1 person is not
actively involved in the day-to-day running
of the business
8. What are the disadvantages of
corporations?
–High start-up cost and effort
–Heavy regulations
–Double taxation
–Loss of control to the board of directors
9. You want to start a business. Tell me
what type of business organization you
would choose and what two
advantages of this business-type are.
(Sole proprietorship, corporation, or
partnership).
12. Explain the difference between a
horizontal and vertical merger.
–Horizontal merger: when 2 companies
that produce the same product merge
–Vertical merger: when 2 companies
involved in different steps of
marketing/producing a specific product
merge
13. How are stocks and bonds different?
• Stocks represent ownership in a
corporation; bonds do not—they are paid
back to the holder after a set period of
time with interest
14. Define franchise.
• Business made up of semi-independent
businesses that offer the same products or
services
15. Define cooperative.
• Business operated for the shared benefit
of its owner, who are also its customers
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