They are the simplest to formsimplest to form because of the small amount of capital needed to start up.

ExamplesExamples are beauticians, dentists, lawyers, dry-cleaning and lawn care.

Sole proprietorshipsSole proprietorships – oneone individualindividual in business for himself/herself.

They make up 72%72% of all businesses and take in 5%5% of total profits.

AA 1. EasyEasy to quit the business if the owner decides to do so. There are no co-owners to consult.

BB 2. Owners receive the entireentire profit.

CC 3. EasyEasy to form–no complicated legal documents or complicated tax forms, small amount of capital needed.

4. Personal satisfaction (psychological-being your own boss)prestige and a sense of accomplishment.

DD 5. TotalTotal control – can make decisions quickly, can hire & fire easily, can respond quickly to trends.

AdvantagesAdvantages of a Sole Proprietorship of a Sole Proprietorship

AA 1. UnlimitedUnlimited liability (debt) - have to forfeit their personal possessions as well as their businesses. (auto, other business, house, savings)

BB 2. Burden of solesole responsibility – must have business sense.

CC 3. LimitedLimited potential for growth – collateralcollateral (any thing of value to guarantee a loan [like giving up your personal possessions) [Let’s say you put your homehome up for collateral but have to give it up]

DD 4. DifficultDifficult to attract qualified employees–can’t offer fringe benefits. [Let’s say you ask for more benefits]

EE 5. ShortShort life span – depends on owner’s health and competence. If the owner diesdies, it is over.

Disadvantages Disadvantages of Sole proprietorshipsof Sole proprietorships

I want medical benefits!I want medical benefits!

PartnershipPartnership - business operated by 2 or more people.

They are the least commonleast common with only 8%8% and take in only 11%11% of profits.

66 2. LimitedLimited – some non-active partners join as an investment (and thus have limited liability-just the investment, not the property). He is a “silent”“silent” partner.

I gave $30,000 as a silentI gave $30,000 as a silent partner, partner, so I don’t have to do anything.so I don’t have to do anything.

Two Forms of PartnershipsTwo Forms of Partnerships55 1. GeneralGeneral – equal decision making & unlimited liabilityunlimited liability among partners.

Let’s say your silent partner puts up $30,000 to insure the loan.

1. SpecializationSpecialization – specific duties assigned to different partners.

AA 2. SharingSharing of losses. Can borrow more and can sustain heavier losses.

BB 3. EasyEasy to form. Small amount of money to start & operate.

CC 4. SharedShared decision making – more informed decisions. 5. Personal satisfaction – sense of accomplishment.

Advantages of PartnershipsAdvantages of Partnerships[“Two heads are better than one.”][“Two heads are better than one.”]

Two Heads Two Heads better thanbetter than One Head One Head77

Disadvantages of PartnershipsDisadvantages of Partnerships

AA 1. DisagreementsDisagreements among partners – conflicts delay decisions, lower employee morale, & lessen efficiency. Each partner is responsible for the acts of all other partners. Must choose good partners.

BB 2. Have to shareshare the profits.

C 3. UnlimitedUnlimited liability – can lose their business and personal possessions.

4. Limited lifeLimited life – sickness, conflicts, or death can end the partnership.

Take That!Take That!

CorporationsCorporations – a business organization recognized as a separate legal entity (existence).

StockholdersStockholders – are the owners of a corporation who invest by buying shares. StockStock – the certificate of ownershipcertificate of ownership. Corporations make up about 20%20% of business organizations but produce over 90%90% of total sales.Corporations can operate like a sole proprietor. Inc. meansthe business is a corporation. [Treated by the courts as an““artificial person”.artificial person”. They can sue, be sued, enter into contracts,and pay taxes.

Two Types of Corporations1. PubliclyPublicly owned – anyone can invest by buying shares, so unlimitedunlimited # of owners. Includes most corporations.2. ClosedClosed – is owned by a limitedlimited number of stockholders. Ford Motor Company was family owned (closed) until 1956. They went public in 1956 & issued 10,200,000 shares of stock. Exxon Mobil leads all other corporations in sales at $371

StockholdersStockholders (ownersowners) and bondholders (lendersenders) For companies, stocks and bonds are 2 ways to raise money. For consumers, they are a way to earn money.

Common stockCommon stock – (owners are votersvoters) gives a voice in how the corporation is run and a share in variable dividends – high dividends if profits are high. The Board of Directors may wish to withhold all dividends if the money is needed for plant expansion or payment on debts. Because they can vote, they determine how a corporation is managed. They get one vote for every share they own.

In a good year, they will receive a higherhigher dividend than preferred stockholders. (Preferred stock dividends are fixed, common stock is not, so they are taking more risk.

Preferred StockPreferred Stock – (non-votersnon-voters) guaranteed dividends that are paid from profits before the company pays any dividends on common stock. If the company is unable to pay this fixed dividend in full, it makes up the difference when the company’s profits increase. They are like a silent partnerlike a silent partner because they can not vote and have no say in how the business is run.

Corporate BondsCorporate Bonds – a certificate issued by a corporation in exchange for money borrowed from investors. There is a written promise to repay the amount borrowed at a later date (an I.O.U.I.O.U.) lending money for 10, 20, or 30 years. BondholdersBondholders are creditorscreditors, not owners.

Advantages of Corporations from a StockholdersAdvantages of Corporations from a Stockholders ViewpointViewpointAA 1. LimitedLimited liability – limited to the amount invested. His personal assets may not be seized to pay corporate debts.BB 2. May earn a profit withoutwithout working.

Advantages From the Corporation’s ViewpointAdvantages From the Corporation’s ViewpointAA 1. SeparationSeparation of ownership from managementof ownership from management – can hire the best management available. Specialized talent can be hired in all areas.BB 2. EasyEasy to raise capitalto raise capital – can issue stocks or sell bonds allowing the corporation to tap the savings of thousands.CC 3. LongevityLongevity – they have a life independentindependent of their owners.

Disadvantages of a CorporationDisadvantages of a Corporation

Disadvantages from the stockholders point of viewDisadvantages from the stockholders point of view.1. When stockholders earn a profit, they feel no great sense of pride.

BB 2. Many Many government restrictionsgovernment restrictions – must follow regulations of the SEC, comply with laws on merging and maintain many records. CC 3. HeavyHeavy organizing expensesorganizing expenses – pay for its charter and then depending on the state, expenses can run from a few hundred to thousands of dollars.DD 4. DoubleDouble taxationtaxation – when a company distributes profits (dividends) to its stockholders, they have to pay personal income tax on dividends in excess of $100. Corporations earnings are subject to taxation. The income tax on corporations is 1515%% on the first $50,000; 25%25% from $50,001- $75,000; 3434%% from $75,001-$100,000; 39%39% from $100,001-$335,000; 35%35% from 335,001-$10 mil. 38%38% from 10M-18.3million; & a flat 35%35% over$18.3 million.

Disadvantages from the corporation’s point of viewDisadvantages from the corporation’s point of view.A 1. SlowSlow in decision making – must go in decision making – must go thru chain of thru chain of commandcommand.

AdvantagesAdvantages//DisadvantagesDisadvantages of Sole Proprietorshipsof Sole Proprietorships

Ease of FormationEase of Formation

Ease of FormationEase of Formation

Single TaxationSingle Taxation

Single TaxationSingle Taxation

Unlimited LiabilityUnlimited Liability

Lack Lack of of ContinuityContinuity

Lack of ContinuityLack of Continuity

AdvantagesAdvantages DisadvantagesDisadvantagesUnlimited LiabilityUnlimited LiabilityFreedomFreedom

Low StartLow Start--up Costsup Costs Difficulty Difficulty Raising MoneyRaising Money

Reliance OnReliance OnOne PersonOne Person

OwnershipOwnershipTransfer DifficultTransfer Difficult

Possibility ofPossibility ofConflictConflict

Larger Talent PoolLarger Talent Pool

Larger Money PoolLarger Money Pool

AdvantagesAdvantages//Disadvantages Disadvantages of General Partnershipof General Partnership

AdvantagesAdvantages DisadvantagesDisadvantages

AdvantagesAdvantages//DisadvantagesDisadvantages of Corporations of Corporations

Stockholder Stockholder RevoltsRevolts

High Start-up costHigh Start-up cost

High Cost of High Cost of RegulationRegulation

Double TaxationDouble Taxation

AdvantagesAdvantages DisadvantagesDisadvantages

Easier Access to MoneyEasier Access to Money

Greater likelihood ofGreater likelihood ofprofessional Managementprofessional Management

ContinuityContinuity

Limited LiabilityLimited Liability

NonprofitNonprofit OrganizationsOrganizations Provides products and services. Profits go into supporting the organization and its outreach. Churches are the most common. Other NPO’s are * Boy Scouts

*Y.M.C.A., *Salvation Army*American Cancer Society* World Wildlife Fund

FranchiseFranchise gives an individual an agreement to market a company’s product in return for a percentage (royaltyroyalty) of the profits. Semi-independent business.

The company is the franchiserfranchiser and the individual is the franchiseefranchisee.

The 1st franchise operation was started by Singer CompanySinger Company in 1851to sell sewing machines. In the last 40 years, franchising has reallytaken off, led by Ray KrocRay Kroc of McDonald’sMcDonald’s.

Today we have franchising for everything from hemorhoid clinics[“You bend, we mend”][“You bend, we mend”] to auto clinics. A typical large city in theU.S. will have its share of Burger Kings, Foto-Mat, KFCs, Goodyear, Taco Bell, Pizza Hut, Dunkin Donuts, and others.

There are 3,0003,000 franchisesfranchises in 670670 industriesindustries, with 600,000600,000 outlets outlets.The franchiser will train your personneltrain your personnel, take care of marketingmarketingand accountingaccounting. The franchiseefranchisee receives a tried-and-testedtried-and-tested businessbusinessmethodmethod.

Advantages of FranchisesAdvantages of FranchisesAA 1. Benefits of a well known tradetrade namename, systemized managementmanagement, and nationalnational advertisement.BB 2. Less than 5%5% fail each year (65% of all independently owned businesses fail within the first 5 years).CC 3. Chance to own yourown your own businessbusiness with minimum riskrisk.

2424 Disadvantages of FranchisesDisadvantages of FranchisesAA 1. May be tootoo manymany restrictions imposed so independence is sacrificed. BB 2. Takes a lotlot of money for start-up 3. May lose your investment if the company goes bankrupt.

Some franchises such as pizza, video rentals, frozen yogurt,instant printing, & tanning parlors will not make it because they are either too competitivetoo competitive or too unhealthytoo unhealthy.Tanning bedsTanning beds are very dangerous. There are two major typesof ultraviolet radiation-UV-A [think of A=Aging]. They have a longer wavelength & penetrate more deeply into the dermis and damage collagen & elastin giving you the dry, leathery,wrinkly look. UV-B [think of B = Burning] are a shorter wavelength & cause sunburn. Both cause melanoma, damagethe DNA of the skin surface and cause skin cancer.

Horizontal MergerHorizontal Merger

AA HorizontalHorizontal Combinations – (a grouping of “competitors”“competitors”) a merger between corporations that make the same product.

This would be a merger of two or more banksbanks, or railroadsrailroads, or airline companiesairline companies, etc. Firms may merge to catch up with or eliminate their rivals. Chevron-Texaco bought Unical Oil.

Royal Caribbean CruisesRoyal Caribbean Cruises acquired Celebrity CruiseCelebrity Cruise Line Line and doubled in size, & became the 2nd largest cruise line behind CarnivalCarnival.

StaplesStaples tried to acquire Office DepotOffice Depot but the government blocked it on the grounds that it would reduce competitionreduce competition. Morgan-Chase-Bank One58 B Cingular-AT&T Wireless 41 B Compaq-HP 23 B GTE-Bell Atlantic 71 B Chevron-Texaco 43 B Daimler-Chrysler-Benz 41 B Sprint-Nextel 35 B Bank of Am.-FleetBoston Finan. 47 B

ChryslerChryslerAmerican MotorsAmerican MotorsChryslerChrysler

3 Types of Corporate Combinations3 Types of Corporate Combinations1. What are the three ways corporate merger combinations can take place? (A mergermerger is when one company absorbs another) 2. What is the current trend in corporate combinations?

Vertical MergerVertical Merger

BB VerticalVertical CombinationsCombinations – merger of companies that are involved in different phases of production of the same product. [Purchasing one of your “suppliers”“suppliers”]

Examples1. 1. AutomakerAutomaker buys a tire factorytire factory2. 2. Bridgestone TireBridgestone Tire buying a rubber plantationrubber plantation3. 3. Campbell SoupCampbell Soup buying mushroom farmsmushroom farms4. 4. Funeral HomeFuneral Home bought a cemeterycemetery and a floral shopfloral shop5. 5. FordFord bought a steel millsteel mill to produce steel needed for autos

USX (Steel)USX (Steel)

Steel MillsSteel Mills

TransportationTransportation[shipping & RR co’s]

ResourcesResources[ore, coal, & iron]

ShellShell Oil CoOil Co. owns1. Oil fields2. Refineries, and3. Retail gasoline stations

CC ConglomerateConglomerate (Unrelated) Combination –merger between four or more companiesfour or more companies producing unrelated products. None is responsible for the majority of sales. These mergers may include a number of subsidiariessubsidiaries – acquired companies that have not been required to abandon their corporate not been required to abandon their corporate identity.identity.

Tobacco Products

Distilled Spirits

American Brands, Inc.American Brands, Inc.

Advantages of Corporate MergersAdvantages of Corporate Mergers1.1. EfficiencyEfficiency – eliminates overlapping jobs, can share resources and marketing skills. Mergers may lead to lower consumerlower consumer pricesprices making them better able to competecompete in world markets.

2. Less expensiveLess expensive, compared to having to build new plants and hire new employees.

3. Stockholders in the acquired corporationsacquired corporations normally benefit by having stock go up in value by about 30%30%.

4. Increased size means they can borrow more money.

Disadvantages of Corporate MergersDisadvantages of Corporate Mergers

1. 1. Managers of merged corporationsManagers of merged corporations may not havenot have the necessary supervisorynecessary supervisory skillsskills.

2. Added unemploymentAdded unemployment when some positions are eliminated. 12,500 were laid off in Fleet Bost-BOA merger saving $650M. When Cingular bought AT&TCingular bought AT&T WirelessWireless, 10,00010,000 were laid off.

3. Purchasing corporation’s stock normally declinesPurchasing corporation’s stock normally declines.

4. Higher prices and fewerHigher prices and fewer choiceschoices for consumers.

5. Acquiring corporation normally corporation normally goes into debtdebt.

Perfect Competition

a market structure in which a large number of firms all produce the same product

Four Four Market ConditionsMarket Conditions Necessary For Perfect Competition Necessary For Perfect Competition

1. Very largelarge number of sellers (hundreds or thousands). Each seller will have only a small share of the market.

2. Similar or identicalidentical products (sweet corn/brocolli/eggs) which means there is no reason for non-price competition.

3. EasyEasy entry and exit into the market.

4. AbsenceAbsence of price controls (too many sellers & consumers).

Perfect Competition and PricePerfect Competition and PriceNo one firm controls priceNo one firm controls price. Lowering price would lower profits as consumers would buy similar substitutes. Prices are set by the market rather than by the firms. These firms are “price takers.”“price takers.”

MonopolisticMonopolistic CompetitionCompetition – fairly large number (25-7525-75) of sellers competing to sell slightly differentiated products. Product differentiationdifferentiation (real or imaginaryreal or imaginary) is vital.This is the most common market structuremost common market structure.

Sellers try to decrease competitiondecrease competition by making their products different from the others. Since each firmattempts to make its product unique,product unique,uniqueunique, there is an “element of monopoly”,“element of monopoly”, thus monopolistic competitionmonopolistic competition. Product Product differentiationdifferentiation, when it is successful, enablesa firm to “establish a kind of monopoly”“establish a kind of monopoly” so that loyal customers will prefer it rather than buy from the competition. [They try to monopolize monopolize a smalla small portion portion of the marketof the market.].]

Market Conditions FMarket Conditions For or MonopolisticMonopolistic Competition Competition1.1. 25-75 buyers25-75 buyers and sellers must exist. Firms act independently but no single firm is large enough to change the supply orprice of a good.

2. The products are similarsimilar but they emphasize productproduct differentiationdifferentiation (differences among products). This is the one thing that separates monopolistic competition from perfectseparates monopolistic competition from perfect competitioncompetition.

The differences may be realdifferences may be real or imaginaryimaginary (a refrigerator withplastic or metal trays). AspirinAspirin, by federal law, has to havecertain chemicals but people believe highly advertised aspirinis better. RevlonRevlon offers 157 shades of lipstick157 shades of lipstick – 4141 are pinkpink.

3. Buyers must be well informedBuyers must be well informed about differences about differences in products.Monopolistic competitors rely on informative and competitiveinformative and competitiveadvertising.advertising.

4. Easy to enter or exitEasy to enter or exit the industry. Few restrictions exist.

Even virtually identical products may be differentiateddifferentiated by brand name, packagingby brand name, packaging,, or designdesign but they are still similarsimilar. They have all the conditions of perfect competition except for product “differentiation.”“differentiation.”They use ““nonpricenonprice”” methods of competition such as advertisingadvertising and improved serviceimproved service to increase sales. ReputationReputation is important [builds loyalty]. Most manufactured goods are made by only a few producers. Very large sums are spent large sums are spent to create minute, meaningless,minute, meaningless, and possibly nonexistent differencesand possibly nonexistent differences among products.

Monopolistic CompetitionMonopolistic Competition[element of monopoly [differentiation uniqueness] so calledmonopolistic competition]

This is the most common market structure – over 99% of all firms.

Examples of Monopolistic CompetitionExamples of Monopolistic CompetitionBlue Jeans Grocery Stores Candy BarsDry Cleaners Rock Concerts PizzaShoe Stores Cassette players ChickenToothpaste Book Stores Soaps and detergentsRestaurants Vacuum Cleaners Furniture StoresBarbershops Beauty Parlors Econ Textbook Co’s

“Econ,Econ”“Econ”

MonopolisticMonopolistic CompetitionCompetition and Priceand Price

There is some controlsome control over price because differentiationdifferentiation creates buyer loyaltycreates buyer loyalty [jeans]. Non-price competitionNon-price competition is used to control price. Developing brand name loyalty will enable a firm to marginally increase price without losing customers. If the increase is too muchincrease is too much, buyers will switchbuyers will switch to a competitor’s product.

The “Real World”The “Real World” The “real world”“real world” of competition involves monopolistic competitionmonopolistic competition & oligopolies. Over 99%99%of all firms are monopolistic competitorsmonopolistic competitors. However,a few thousand oligopolies few thousand oligopolies produce most of theproducts in the U.S. So, our big firms are oligopolistsand our smaller firms are monopolistic competitorssmaller firms are monopolistic competitors.

OligopolyOligopoly – “the chosen few”“the chosen few” (3 or 4) firms control 70% of the market.

MonopolyMonopoly – 1 firm industry (Cable TV)

DuopolyDuopoly – 2 firm industry. (Coke & Pepsi)[P&G (47%) & Kim-Clark (30%) in diapers]

““Oligo”Oligo” – few in an industry. (“Big 3 or 4” or even “Big 5 or 6”)

Oligopoly Examples

AutosAutos – “Big 5” – GM, Ford, Chrysler, Honda, & ToyotaAthletic ShoesAthletic Shoes–“Big 4”–Nike, Reebok, New Balance, Adidas, [Nike made $10 billion in 2004]BeerBeer – “Big 3” – Anheuser-Busch, Miller, & Coors

CerealsCereals – “Big 3” – Quaker Oats, General Mills, & KelloggsTV NetworksTV Networks – “Big 4” – NBC, CBS, ABC & FoxThere are also oligopolies in chewing gum, light bulbs, typewriters, photocopiers, and sewing machines.

ShoxShox is Nike’s latest hot seller. It is modeled on a 10,000 year old sandal discovered in an Oregon cave.

Market Share of Phone SalesMarket Share of Phone SalesNokia 34% Siemens 7%Nokia 34% Siemens 7%Motorola 16% L.G.TMotorola 16% L.G.Telecom elecom 7%7%Samsung 11% Sony Samsung 11% Sony 6%6%

Big 3 Subscribers[mil.]Big 3 Subscribers[mil.]

AT&TWireless

Verizon Verizon WirelessWireless

SprintSprintNextelNextel

51.6 M 47.4 M 40.4 M

Four Market Conditions For OligopoliesFour Market Conditions For Oligopolies1. A few sellersfew sellers control overcontrol over 70% 70% of market.2. Firms offer identical or differentiatedidentical or differentiated products (real or imaginary). AdvertisingAdvertising important.3. Product informationProduct information must be easily availableeasily available. They use informative advertisementinformative advertisement (price, quality, and special features) to introduce new products.4. There are huge barriers to entryhuge barriers to entry into the industry. The three major barriersthree major barriers are technological technological knowledge, money, & brand name loyalty knowledge, money, & brand name loyalty. In 1980, it cost Ford $3 billion$3 billion to equip a factory that would produce two new subcompactssubcompacts. EntryEntry is difficultdifficult because many have patentspatents or own essential raw materials. This makes it difficult for new firms to try to compete. Oligopoly and PriceOligopoly and Price Oligopolies control price to some degreecontrol price to some degree by creatingcreatingbrand name loyaltybrand name loyalty and using non-price competitionnon-price competition.

27 CollusionCollusion – a formal price agreementformal price agreement among competitors.This is illegal illegal because it presents a danger to free competition.Even one email email from one manager to another is illegalillegal.

26 Price LeadershipPrice Leadership – when one firmone firm, usually the largestlargest and most powerfulmost powerful in the industry, offers a new productoffers a new product at a certain pricecertain price. The others then follow because they fear a price war or because they would be better off financially by doing so. In other words, oligopolists play the game, “follow the leader”“follow the leader”.. Price leadership is legallegal (unlike collusionunlike collusion) because it doesnot involve any agreement among competitors. If the competition does not follow the leader’s price, the leading firmmay be forced to change its price and fall in line with the pricesof the competition. Predatory pricing - the practice of a large, powerful firm driving smaller firms out of the market by temporarily selling at an artificially low price is illegal.

Pure MonopolyPure Monopoly – oneone firmfirm industry [“monopolist”]

Pure Monopoly’s Market ConditionPure Monopoly’s Market Condition 1. One firmOne firm is the only selleronly seller. Advertising promotes image. 2. No close substituteNo close substitute goods are available.3. ProhibitiveProhibitive barriers to entrybarriers to entry in the industry. High invest-High invest- ment costsment costs and technological expertisetechnological expertise prevent others from entering the market. Legal restrictionsLegal restrictions make entry in government-supported monopolies nearly impossible. Also, ownershipownership of a of a scarce factor of production scarce factor of production prevents competition. 4. Almost complete controlcomplete control of market priceprice.

Monopolist have muchmuch control over price because they arethe only selleronly seller. A higher price would hurt demandhigher price would hurt demand. The statestate may control the price on some legal monopoliesmay control the price on some legal monopolies. These singlesuppliers are “price makersmakers.”

Four Types of Legal Four Types of Legal MonopoliesMonopolies

1. Natural MonopolyNatural Monopoly – where competition would bechaoticchaotic, it is naturalnatural to give the business to one firm. Imaginethe confusion if 5 different busses5 different busses raced each other to the corner to pick up a passenger. Competition would be impractical, inconvenientimpractical, inconvenient, & unworkableunworkable.

Examples: Public UtilitiesPublic Utilities (electric & gas) – privatelyprivately ownedcompanies (busesbuses-Continental Trailways) but regulated by the governmentgovernment. Comcast Cable TVCable TV in Plano. The governmentmonitors the natural monopoliesmonitors the natural monopolies to ensure that they providequality service at reasonable rates.AT&TAT&T had a long-distance telephone natural monopoly for 75years.

Waste ManagementWaste ManagementTXU ElectricTXU Electric

GreyhoundGreyhound

• Ex’s are utility companies and cable TV

• Market where average costs are lowest when all output is produced by a single firm

Natural Monopoly

• Where competition would be chaotic, therefore, it is natural to give the business to one firm

• They are privately owned, but regulated by the government

GovernmentGovernment MonopolyMonopoly – monopoly owned

and operated by the government.

The difference between natural [privately owned]natural [privately owned]& government monopoliesgovernment monopolies [ [government ownedgovernment owned] isthat these monopolies are owned operated by anyowned operated by anyof the three levels of governmentof the three levels of government..Examples: interstate highway system, public schoolsinterstate highway system, public schoolsand public libraries, postal service, and DARTand public libraries, postal service, and DART. In most cases, government monopolies deal with economiceconomic products needed for the public welfare products needed for the public welfare but which people would not be provided adequately by private industry. Most tend to provide goods thatprovide goods thatenhance enhance the the general welfare rather than seek profitsgeneral welfare rather than seek profits.

DartDart

Pilot Point HighPilot Point High[Local G][Local G]

State GState G Federal GFederal G

• The Government has control over:

• U.S. Mail,

• State highways, and

• Public schools BryanBryanAdamsAdams

Another muggingat Bryan Adams

1414 Geographic Geographic MonopolyMonopoly – when a firm is the only seller of a good in a specific location.

The “Last Chance Gas Station”“Last Chance Gas Station” is the last one within 50 miles of Mexico. A general Storegeneral Store in a remote community has a monopoly because the area can’tarea can’t support two storessupport two stores. Geographic monopolies are notnot guaranteed.guaranteed.

4. Technological MonopolyTechnological Monopoly – results from the inventioninvention of a newnew productproduct (patentpatent) or when technology changes the way a good is produced. General DynamicsGeneral Dynamics is the only defense contractor with the technology to build Trident SubmarinesTrident Submarines.

A patentpatent gives an individual or firm exclusive right to pro- duce, use or dispose of an invention or discovery for 20 years20 years from the date of filing.To obtain a patentobtain a patent, you must go to the PatentOffice after doing researchresearch to make sure thepatent has not already been patented. Then You hire a patent lawyerpatent lawyer to file your patent.All of this takes about 18 months18 months. The totalcost for a patentcost for a patent runs about $5,000$5,000. 17 It is veryvery expensiveexpensive to wage a patentpatent infringement suitinfringement suit, around $300,000$300,000..

Polaroid’s Polaroid’s cameracamerapatentpatent prevailed& won $929 $929 millionmillion.Polaroid had accusedKodak of infringing on 7 instant photo7 instant photopatentspatents & it took 1010yearsyears to make it to the Supreme Court.

Copyright

Copyright- gives the author or artist the exclusive right to publish, sell, or produce his work for his life + 50years. So copyrights protect written works of art.

VeryMany

Cable TVWater

Agric. productsFishery

Some

Fair Amount

Fair amount with

differentiatedoligopolies

Extensive

Extensive