1. Free Enterprise

2. What is Free Enterprise?
Encouraging private ownership and individual initiative (independently outside of influence or control)‏

3. Tradition of Free Enterprise
America is considered the “land of opportunity”
History of social and political commitment to entrepreneurship and competition in the marketplace.
Examples: Rockefeller, Carnegie, Henry Ford

4. Basic Principles of Free Enterprise
1. Profit Motive
Encourages Individuals to take the risk of investing in business
Individuals make decisions that will maximize profits
Requires financial discipline = individuals are responsible for success or failure
Rewards innovation
Allows creative companies to grow
Improves productivity = higher profits to more efficient company

5. Basic Principles of Free Enterprise
2. Open Opportunity
EVERYONE can compete in the marketplace
3. Economic Rights
- Legal equality = everyone has the same legal rights
- Private property rights = you control your possessions as you wish.
- Free contract
- Voluntary exchange = you decide what and when to buy and sell

6. Role of Government
4. Copyrights – Grants an author exclusive rights to publish and sell their work.
Piracy: Downloading of music, burning CD’s (Examples: Napster, Limewire etc.)‏
5. Patent – Gives inventor exclusive right to produce and sell a product for 20 years.

7. Review
What Economic Philosopher would agree with the free enterprise system? Why?
How is a patent different than a copyright?
What is the Number 1 motive people have to enter into the free market system?
What risk do Entrepreneurs take to enter the free market?

8. Factors that Effect Economic Decisions
Productivity: The value of output produced
Production: The creation of value or the producing of articles that have exchange value.

9. BUYERS & SELLERS COME TOGETHER TO EXCHANGE THINGS OF VALUE
Consumption
The amount of goods and services used
Goods- Products
Services- things provided
BUYERS = CONSUMERS
SELLERS = PRODUCERS
BUYERS & SELLERS COME TOGETHER TO EXCHANGE THINGS OF VALUE

10. Specialization:
Focusing your efforts on a limited number of activities
Doctors, Teachers, Lawyers
Efficiency:
Performing in the best possible manner with the least waste of time and resources
Division of Labor:
Each person is given a specific task to repeat over and over again.
Henry Ford…assembly line

11. Competition in the Marketplace

12. MONOPOLY ONLY ONE PRODUCER NO COMPETITION CHARGE HIGHER PRICES
PRODUCE LESS
PROVIDE LESS QUALITY (WHY?)
What is an example of a current monopoly?

13. OLIGOPOLY Only a few producers
Operate between competitive markets and monopolies
Examples: Utilities (what are they?)
Utilities: Natural Gas, Electricity

14. CONGLOMERATES:
Large Companies that combine to form larger companies
Example: General Electric (GE) – They own NBC, financial services and health care services
Multi-National Conglomerators: CONGLOMERATE with companies operating in more than one country.
Example: BP (British Petroleum)

15. MERGER The process when one firm buys/joins with another.
Horizontal Merger-
Joins two or more firms competing in the same market with the same good or service.
Vertical Merger -
Joins two or more firms involved in different stages of producing the same good or service. A vertical merger can allow a firm to operate more efficiently.
An example of a vertical merger is a car manufacturer purchasing a tire company.

16. Market Structure
Competition
The rivalry between sellers to attract customers while lowering costs
Cooperation
the combination of persons for purposes of production, purchase, or distribution for their joint benefit

17. Review
Why do Monopolies tend to produce less output, charge higher prices, and provide less quality than competitive markets?
What is the difference between competition & cooperation?
There is no competition