Markets and market structures
What is a market? Marketis any arrangement people have for trading with one another.
What do economists mean by the market structure? The conditions under which competition exists in a market are called/referred to a market structure.
What are the principal types of market structures? The principal kinds of market structures are perfect competition, monopolistic competition, oligopoly, and monopoly
What is perfect competition? Perfect competition (Pure competition):A market for uniform products in which there many buyers and sellers, no one of which is big enough to affect the price, and has full knowledge of market conditions.
What are the key characteristics of perfect competition?
ü A large number of buyers and sellers all engaged in the purchase and sale of exactly the same commodity.
ü Identical commodity offered for sale.
ü Each buyer or seller has perfect knowledge of market prices and quantities.
ü There are no barriers to entry or exit.
What is monopolistic competition? Monopolistic competition: A state of competition in a market in which many firms compete, producing similar but slightly differentiated products.
ü What are the key characteristics of monopolistic competition?
ü a large number of firms producing similar but not identical products;
ü product differentiation;
ü some restrictions of information about market prices and quantities of goods;
ü a relatively easy entry to the market.
What is product differentiation? Product differentiation: A process of creating uniqueness in a product.
What is oligopoly? Oligopoly: A term applied to markets dominated by a few large firms.
What are the key characteristics of oligopoly?
The high cost of entry
patent protections
price leadership, collusion, and custom to determine pricing policies.
What is monopoly? Why does monopoly exist?monopoly is defined as a single firm producing unique products for which there are no close substitutes.
What is imperfect competition? Imperfect competition: A market in which there is neither pure perfect competition nor pure monopoly.
How does imperfect competition differ from perfect competition and monopoly? Imperfect competition describes markets in which sellers have more freedom to determine prices than they have under perfect competition, but less than they have under monopoly.
THE ECONOMY OF UKRAINE
1. When did Ukraine gain its independence? Ukraine gained its sovereignty in 1991 on the break up of the former Soviet Union.
2. What problems did Ukraine face at the beginning of its independence? When become independent the young country faced a number of simultaneous challenges and had to go through highs and lows1 within the context of the Ukraine's transition to a market economy.
3. What are the biggest cities of Ukraine and what are they famous for? The world’s largest rocket factory is located in Dnipropetrovsk. Airplanes are produced by the world’s famous company named after Antonov. The best tanks are produced in Kharkiv. The main shipbuilding factories are based in Mykolaiv and Kerch.
4. What are the main industries of Ukraine’s economy? It has a major ferrous metal industry, producing cast iron2, steel, and steel pipe, and its chemical industry produces coke, mineral fertilizers, and sulfuric acid3.
Which industries contribute to GDP of Ukraine most of all? What industries are the most export oriented? Coal and ore mining, chemical refining, and electricity production constitute 60 percent of GDP. Besides metals the main exports include: tractors, machinery, building materials, chemicals, consumer goods, crops and fertilizers.
4. What are the most important sectors of Ukraine’s industrial production? Ukraine's machine building produces ships, spacecraft, aircraft, locomotives, machine tools and mining equipment.
5. What are the most important branches of Ukraine’s agriculture? crop production, Cattle and pigs, Sheep and goats
6. What is the position of Ukraine in the world’s grain market? Grain output is almost 1 ton per person. Ukraine ranks as a leading wheat-growing country.
7. What are the main crops cultivated in Ukraine? What crops does Ukraine export? wheat, such grains as barley, corn, legumes1, oats, rye2, millet3, buckwheat4 are grown. Other food crops include potatoes, vegetables, melons, berries, other fruit, nuts, and grapes.
8. What are Ukraine’s main exports and imports? main exports and imports include: tractors, machinery, building materials, chemicals, consumer goods, crops and fertilizers.
9. What can promote a suitable climate for persistent growth of Ukraine’s economy? These account for higher potential for considerable progress in agricultural production.
What are the priorities of the government’s activity? foreign investments in agribusiness are also rather important for the country’s economy
10. What should be the priority of the government – Euro 2012, stable local currency, social protection or something else? Why? Prove you opinion.
BUSINESS ORGANIZATIONS
What are the advantages of this form of business organization? Advantages of a Sole Proprietorship
Ø A sole proprietorship is the least costly and easiest form of business organization to launch and operate.
Ø A sole proprietorship is a business in which the owner is fully and personally responsible for all the obligations of the enterprise.
Ø A sole proprietor is entitled to all the company’s profits and takes complete managerial control.
Ø A sole proprietor is free to make any business decision – what kind of business activities to choose, who to hire or fire, when to take a vacation, when to liquidate his or her business and so on.
Ø There is preferential tax treatment. It means that any profit earned from the business is considered a sole proprietor’s income. The owner pays only personal income taxes on the business’s profits, which are reported as personal income on the proprietor’s individual income tax return.
What are the disadvantages of a sole proprietorship?Disadvantages of a Sole Proprietorship
Ø Unlimited liability being the major disadvantage of a sole proprietorship means that a sole proprietor assumes the burden of any losses or liabilities the enterprise faces. A business owner is personally responsible for the company’s debts. It means that personal assets such as money from his bank account and the proceeds from the sale of his house can be taken to pay liabilities of the business.
Ø Limited resources refer to the owner’s personal financial resources and his or her ability to borrow.
Ø A sole proprietorship ends with a sole proprietor’s death.
What are the advantages of a partnership? Advantages of a Partnership
Ø A partnership is relatively easy and inexpensive to establish.
Ø There are more possibilities in raising funds because the borrowing power of two or more partners is greater.
Ø Each partner can benefit a partnership by his/her knowledge, skills or ideas and specializes in certain activities of the business.
Ø Like a sole proprietorship partnerships are subject to special tax treatment. Any profit of a partnership passes on to its owners, who report their portion of earnings on their personal income tax returns.
What are the disadvantages of a partnership?Disadvantages of a Partnership:
Ø A partnership has unlimited liability and if it is unable to meet its financial obligations, partners have to use their personal assets to pay off all the business’s debts.
Ø Profit sharingcan excite controversy when one or more partners aren’t putting great efforts into the management of the business.
Ø Disagreements between the partners may cause management conflicts. Partners’ different ideas on how to run the company can lead to disagreements that are likely to harm its business activity.
Ø The partnership is terminated because of the withdrawal or death of a partner. If the business is to continue, a new partnership agreement must be drawn up.
What are the advantages of a corporation?Advantages of a Corporation:
Ø Limited liability is one of the major advantages of a corporation. Shareholders are not liable for the debts of a company they own shares in. If a business fails shareholders can lose no more than he or she has paid for the shares of stock but their personal assets – car, home, and personal bank accounts – are safe from the creditors of the business.
Ø Being a separate legal entity, the corporation actually owns and operates the business for the benefit of the shareholders, but under their total control.
Ø Shares of ownership are transferable.Stockholders can enter or leave a corporation at will simply by buying or selling shares of stock.
Ø Corporation has unlimited life.The corporation’s power of succession enables it to have a continuous existence. Unlike a sole proprietorship, the death of the corporate stockholders will not terminate the corporation, since their shares are passed on to their heirs.
Ø It is much easier for a corporation to increase capital to manage and expand its operations. To raise additional funds corporation attracts new stockholders by selling its new issues of shares to the public.
What are the disadvantages of a corporation?Disadvantages of a Corporation
Ø A corporation is difficult and expensive to create and organize. This process requires higher start-up capital and the services of a lawyer to obtain a government charter.
Ø Corporation is subject to double taxation. As a legal entity it pays a corporate income tax. Then, if the corporation distributes some of its net income to the stockholders as dividends, they are taxed again on the stockholders’ individual income tax returns.