Chapter 7 Notes 20. Chapter 7 Vocab Practice 32. Be An Entrepreneur 30. Chapter 8 Notes 20. Cooperative Business Notes 20

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1 Name: Period: Week: Dates: 3/2-3/16 Unit: Markets & Business Organizations Chapters: 7 8 Monday Tuesday Wednesday Thursday Friday 2 O *Chapter 7 9 E *Ch 8 *Cooperative Business Organization 3 E 4 O 10 O 11 E *Chapter 7 *Assisting Ag Producers 5 E 6 O 12 O 13 E *Be An Entrepreneur *Chapter 8 16 O 17 E 18 O 19 E 20 O *Unit Test *Packet Due Assignment Your Score Total Points Possible Chapter 7 Notes 20 Chapter 7 HW: Page , 10, Chapter 7 Vocab Practice 32 Be An Entrepreneur 30 Chapter 8 Notes 20 Chapter 8 HW: page , Cooperative Business Notes 20 Assisting Ag Producers Notes 15 TOTAL 267 1

2 Good to Know Vocab! Word Definition Liability Corporation Conglomerate Royalties Non Profit Cooperative Strike Arbitration Bargaining Glass Ceiling Collective Labor Union Contingent 2

3 Chapter 7 Perfect Competition The Four Conditions for Perfect Competition Perfect competition is a market in which a large number of firms all produce the same product. 1. Many Buyers and Sellers 2. Identical Products 3. Informed Buyers and Sellers 4. Free Market Entry and Exit Barriers to Entry Start-up Costs Technology Price and Output 3

4 Section 1 Assessment 1. Which of the following is NOT a condition for perfect competition? (a) many buyers and sellers participate (b) identical products are offered (c) market barriers are in place (d) buyers and sellers are well-informed about goods and services 2. How does a perfect market influence output? (a) Each firm adjusts its output so that it just covers all of its costs. (b) Each firm makes its output as large as possible even though some goods are not sold. (c) Different firms make different amounts of goods, but some make a profit and others do not. (d) Different firms each strive to make more goods to capture more of the market. Defining Monopoly *A monopoly is a market dominated by a seller. *Monopolies form *Monopolies can take advantage Forming a Monopoly 1. Economies of Scale 2. Natural Monopolies 3. Technology and Change Government Monopolies Technological Monopolies Franchises and Licenses Industrial Organizations Price Discrimination Price discrimination is the division of customers into groups based on how much they will pay for a good. *Although price discrimination is a feature of, it can be practiced by any company with market power. Market power is the ability to prices and total market output. *Targeted discounts, like student discounts and manufacturers rebate offers, are one form of price. *Price discrimination requires some market, distinct customer groups, and difficult resale. Output Decisions *Even a monopolist faces a limited choice *Monopolists will try to maximize profits.. 4

5 *A monopolist sets output at a point where marginal revenue is equal to marginal cost. Section 2 Assessment 1. A monopoly is (a) a market dominated by a single seller. (b) a license that gives the inventor of a new product the exclusive right to sell it for a certain amount of time. (c) an industry that runs best when one firm produces all the output. (d) an industry where the government provides all the output. 2. Price discrimination is (a) a factor that causes a producer s average cost per unit to fall as output rises. (b) the right to sell a good or service within an exclusive market. (c) division of customers into groups based on how much they will pay for a good. (d) the ability of a company to change prices and output like a monopolist. Four Conditions of Monopolistic Competition In monopolistic competition, many companies compete in an market to sell products which are similar, but not identical. 1. Many Firms 2. Few Artificial Barriers to Entry 3. Slight Control over Price 4. Differentiated Products 5

6 Nonprice Competition Nonprice competition is a way to attract customers through style, service, or location, but not a price. 1. Characteristics of Goods 2. Location of Sale 3. Service Level 4. Advertising Image Prices, Profits, and Output Prices Prices will be higher than they would be in perfect competition, because firms have a small amount of to raise prices. Profits While monopolistically competitive firms can earn profits in the short run, they have to work hard to keep their product distinct enough to stay ahead of their rivals. Costs and Variety Monopolistically competitive firms cannot produce at the lowest average price due to the number of firms in the market. They do, however, offer a array of goods and services to consumers. Oligopoly Oligopoly describes a market dominated by a large, firms. Collusion Collusion is an agreement Cartels Comparison of Market Structures Markets can be grouped into four basic structures: perfect competition, monopolistic competition, oligopoly, and monopoly 6

7 Section 3 Assessment 1. The differences between perfect competition and monopolistic competition arise because (a) in perfect competition the prices are set by the government. (b) in perfect competition the buyer is free to buy from any seller he or she chooses. (c) in monopolistic competition there are fewer sellers and more buyers. (d) in monopolistic competition competitive firms sell goods that are similar enough to be substituted for one another. 2. An oligopoly is (a) an agreement among firms to charge one price for the same good. (b) a formal organization of producers that agree to coordinate price and output. (c) a way to attract customers without lowering price. (d) a market structure in which a few large firms dominate a market. Market Power *Market power is the ability of a company to prices and output. *Markets dominated by a large firms tend to have higher prices and lower output than markets with sellers. *To control prices and output like a monopoly, firms sometimes use predatory pricing. Predatory pricing sets the market price cost levels for the short term to drive out competitors. Government and Competition *Government policies keep firms from the prices and supply of important goods. Antitrust laws are laws that encourage competition in the marketplace. 1. Regulating Business Practices 2. Breaking Up Monopolies 3. Blocking Mergers 4. Preserving Incentives Deregulation *Deregulation is the removal of some controls over a market. *Deregulation is used to promote. *Many new competitors enter a market that has been deregulated. This is followed by an economically healthy weeding out of some firms from that market, which can be hard on workers in the term. Section 4 Assessment 1. Antitrust laws allow the U.S. government to do all of the following EXCEPT (a) regulate business practices (b) stop firms from forming monopolies (c) prevent firms from selling new experimental products (d) break up existing monopolies 2. The purpose of both deregulation and antitrust laws is to (a) promote competition (b) promote government control (c) promote inefficient commerce (d) prevent monopolies 7

8 Vocabulary Practice CHAPTER Use the following clues to complete the crossword puzzle. Across 1. simplest market structure 6. market structure dominated by a few large profitable firms 8. when government no longer decides each company s market role and pricing 9. grants firms control over scarce resources 10. can cause difficulties in getting into the market 11. firm s right to sell its goods within an exclusive market 12. a product that is the same regardless of who makes or sells it 13. joining of one firm with another to form a single firm 14. exclusive rights to sell a new good or service for a specific period of time 15. expenses of a new business before product reaches the customer 16. market structure that characterizes an industry run most efficiently by one large firm Down 2. oligopoly members agreement on price and output 3. formal organization of producers that sets price and output 4. single supplier in a given market 5. competition based on differences other than pricing among products 7. charging special groups different prices Prentice-Hall, Inc. 8

9 Be an Entrepreneur! DIRECTIONS: Read pages carefully in your groups and be prepared to go through the simulation, records your company s decisions and present to the class. Preparing the Simulation: Group Members: Name of Company: Design a Logo for your Company: Conducting the Simulation: Step 1 9

10 Step 2 How many and what kind of caps do you want to buy? (See blue chart on page 209) Step 3 Determine the price you want to set for each cap and calculate the profit per cap Step 4 Determine how many caps you need to sell in order to make a profit (after paying your monthly expenses)? TOTAL Monthly Sales Profit - Total Monthly Expenses = How many total caps do you have to sell to make a profit: 10

11 Step 4 Assume that you sell equal numbers of each type of cap. How many caps do you have to sell each month to break even (after paying your monthly expenses)? TOTAL Monthly Sales Profit - Total Monthly Expenses = How many total caps do you have to sell to break even: Step 4 How many caps do you have to sell each month to make a profit large enough to pay salaries to you and your business partners (after paying your monthly expenses)? TOTAL Monthly Sales Profit - Total Monthly Expenses = How many total caps do you have to pay salaries to you and your business partners: How much salary does each group member get per month:

12 Simulation Analysis Be an Entrepreneur! Answer questions 1-4 on page 209 Below What was the most interesting part about this simulation? What was the hardest part? 12

13 Cue Column (titles, vocab, big ideas, test questions) Chapter 8 Chapter 8 13

14 Cue Column (titles, vocab, big ideas, test questions) Chapter 8 Summary (briefly describe the main concepts, major points) 14

15 Cooperative Business Organizations Cue Column (titles, vocab, big ideas, test questions) Cooperatives 15

16 Cue Column (titles, vocab, big ideas, test questions) Cooperatives Summary (briefly describe the main concepts, major points) 16

17 Organizations Assisting Agriculture Producers Cue Column (titles, vocab, big ideas, test questions) Organizations Assisting Ag Producers Summary (briefly describe the main concepts, major points) 17

18 Internet Search Agricultural Organizations During this activity use a search engine to search for agricultural organizations that benefit agricultural producers. During the search identify three organizations, copy the corporate logo and then paste it into a document labeled "Organizations Benefiting Agricultural Producers". Under each logo will list the following information: 1. How is the organization funded? 2. What is the primary commodity represented by the organization? 3. What is the primary service provided by the organization? Be prepared to share one of your organizations. ~Print document and turn in to Mrs. Bishop~ 18