Gov/Econ- Vinson

Unit Four

Business Operations
Complete the following assignment after reading section 1 of chapter 7 of the Economics text:

1. Most of you have (or have had) a job. Does shirking occur where you work? What impact does it
have on your work environment and productivity? What is your boss’s role as a monitor? If you
don’t have a job, tell me what your parents or friends say about their employer/workplace:

I used to work with my cousins cleaning up a store for a man. Shirking occurred once, as we all got
pretty angry at the shirker. The impact shirking had on me was that I was obviously angry, because
I had to work harder to pick up the slack of the shirker and it made us as a team stay longer than
we would have liked. The role of the monitor is to lead the team to work more efficiently and
reduce the amount of shirking.

2. Provide a definition for each type of business and list at least two advantages and disadvantages of
each:

Sole Proprietorship- a business that is owned by one individual, who makes all the business
decisions and takes both all the profit, or all the losses of the firm. The individual is also legally
responsible for any debts of the firm.

Advantages:
● Easy to form or dissolve. Only need to
meet certain broadly defined
governmental regulations
● Profit of the firm is taxed only once
Disadvantages:
● Sole proprietor faces unlimited liability
● Sole proprietorship dies with the
retirement or death of the proprietor.

Partnership- a business that is owned by two or more co-owners called partners. They share any
profits the business earns and are legally responsible for any debt incurred by the firm.

Advantages:
● Corporate income taxes do not apply,
only personal income taxes apply to it
● The partnership leads to the partners
focusing on what they are good at,
which can gives it a better chance to
succeed
Disadvantages:
● Having limited partners could leave one
partner taking on all the debt incurred
● Decision making can be frustrating and
complicated.

Corporation- a legal entity that can conduct business on its own name in the same way that an
individual does, and is owned by stockholders.

Advantages:
● The owners of the corporation
(stockholders) have limited liability,
which makes them not personally liable
for the debts of the corporation
● Corporations continue to exist even if
one or more owners sell their shares or
die
Disadvantages:
● Corporations are subject to double
taxation
● Corporations are harder and more
difficult to form than sole
proprietorship or partnerships.
3. During synchronous time we listed some of the businesses we regularly patronize. Put as many as
you can into each of the three categories below (if you don’t have any under “Partnership”, that’s
okay):

Sole Proprietorship Partnership Corporation

● Shopify Stores ● Nike

● El Molino ● Adidas
● Daisy’s Barbery and ● Walmart
saloon ● Target
● Oliver’s
● Chick fil a

4. Most of us do a good deal of businesses with corporations these days. Tell me about one of the
corporations you listed above. Why do you buy from this business? What do you like about their
product/service? Why don’t you buy this product/service from a local sole proprietor?

I personally buy a lot of my clothes from Nike. I buy from them as I think their clothes are very high
quality as it always tends to last very long. The reason I often don’t buy from a local sole proprietor
is, because I don’t know if the quality is the same, or sometimes I don’t even really know they exist.

5. What is a franchise, and what are the advantages and disadvantages for the franchisee?

What is it? A contract by which a firm (usually a corporation) lets a person or group use its
name and sell its goods and services.

Advantages: There is already a lot of national advertisement, you are buying something that
has already been proven successful.

Disadvantages: The franchiser may fail to provide the financial and training support the
franchisee expects, or the franchisee might not provide the quality of service
and product that the franchiser expects.

6. Re-read the section titled “What Is the Ethical and Social Responsibility of Business” and tell me
whether you support the Nader view or the Friedman view, and why:

After hearing both arguments there are some points I disagree with. However, I mainly agree with
the Friedman view. I think that as long as the business is not doing anything unethical it is
completely okay. More importantly, as long as it does not lie to its consumers I see no problem in
trying to maximize their profits. However, I disagree with the part of “who cares about the red
cross’ because I think that although it may not have to donate big amounts of money they should
still donate to the community as a way of giving back to their consumers.