1. ECONOMIC$ $TANDARD:
SSEMI4 The student will explain the organization and role of business and analyze the four types of market structures in the U.S. economy.
a. Compare and contrast three forms of business organization—sole proprietorship, partnership, and corporation.
b. Explain the role of profit as an incentive for entrepreneurs.
c. Identify the basic characteristics of monopoly, oligopoly, monopolistic competition, and pure competition.

2. Marginal Product of Labor
The change in output from hiring one more worker
Measures the change in output at the margin, where the last worker has been hired or fired
Adding another worker increasing production to 7 pizzas per hour.
3 workers can make 5 pizzas per hour
What is the marginal product of labor for the 4th worker?

3. Increasing Marginal Returns
Specialization increases output per worker
If each person can specialize in a task, they won’t waste time switching from tasks, which will allow them to become more skillful at their assigned task
Therefore, each worker can produce more

4. Diminishing Marginal Returns
When adding more workers increases total output, but at a decreasing rate
Producing less and less output from each additional unit of labor added to the mix
This is a result of limited capital

5. Marginal product of labor
# of workers
Beanbags per hour
Marginal product of labor - 1 4 2 10 6 3 17 7 23 5 28 31 32 8 -1

6. Production Costs
Fixed Cost – does not change no matter how much is produced; ex: rent, machinery, etc
Variable Cost – changes with production (direct relationship); ex: raw materials, some labor
Total Cost – Fixed Cost + Variable Cost

7. Marginal Cost – the additional cost of producing one more unit
Marginal revenue (price) = how much you would make off of selling one more unit of a good

8. How to Find the Best Level of Output
Firm’s basic goal: maximize profit
Profit = total revenue – total cost
To have the biggest profit you would want a big difference b/t total revenue & total cost
OR when

9. Assessment
Explain whether each of these expenses of a textile mill is a fixed cost or a variable cost, and why.
Repairs to a leaking roof
Cotton
Food for the mill’s cafeteria
Night security guard
Electricity

10. Types of Business Organizations

11. The Purpose of a Business Organization
A business is formed to carry on commercial enterprises and earn a profit.
The most common type of business is a sole proprietorship.
A sole proprietorship is a business that is owned and managed by a single individual.

12. Sole Proprietorships
This type of business makes up 75% of all businesses in the U.S.
They account for 6% of all sales.
Examples- Local bakery, bike-repair shop, hair salon, etc.

13. Advantages of Sole Proprietorships
Easy to start
Must obtain a business license
Must find a place to conduct business.
Must register a name
Few govt. regulations
ex. Health codes, zoning laws, etc.
Owner receives all profits
Owner has full control of all decisions
Easily makes changes

14. Disadvantages of Sole Proprietorships
Unlimited Personal Liability- owner legally responsible for all debts.
Limited Access to Resources- Bank unwilling to lend money. All funds come from owner.
Lack of Permanence- Sole proprietorships close when an owner dies, retires, loses interest, etc.

15. Potential for conflict
PARTNERSHIPS
Advantages
Disadvantages
Easy to open and close
Unlimited liability
Few regulations
Potential for conflict
Access to resources
Limited life
Joint decision making
specialization

16. TYPES OF PARTNERSHIPS Most common Parents share responsibility
General
Limited
Limited liability
Most common
Parents share responsibility
Every partner is responsible for debts, losses
Tradeoff= rewards
Limited owners only invest money
Not responsible for day to day operations
Only can lose money that had been invested
All partners are limited
Not responsible for others’ mistakes
Only certain businesses can be one: medical practices, legal offices and accounting firms