marketing management
4-2 (Key Question) Assume that the five residents of Econoville receive incomes of $50, $75, $125, $250, and $500. Present the resulting personal distribution of income as a graph similar to Figure 4.2. Compare the incomes of the lowest and highest fifth of the income receivers. The distribution of income is quite unequal. The highest 20 percent of the residents receive 10 times more income than the lowest 20 percent.
4‑4 (Key Question) What are the three major legal forms of business organization? Which form is the most prevalent in terms of numbers? Why do you think that is so? Which form is dominant in terms of total profits? What major advantages of this form of business organization gave rise to its dominance? The three legal forms of business organizations are: sole proprietorship, partnership, and corporation. Proprietorships are the most prevalent. They are easy to start (relatively low cost), often don’t require a large customer base to be profitable, and provide maximum freedom for the proprietor to do what she/he thinks best. Corporations are dominant in terms of total profits. They can access large amounts of money by issuing stocks and bonds; their limited liability is attractive to potential owners; their size and broader ownership base help ensure continuity that helps to build a large customer base and gain cost advantages (a preview for economies of scale).
4-9 (Key Question) What are the two characteristics of public goods? Explain the significance of each for public provision as opposed to private provision. What is the free-rider problem as it relates to public goods? Is U.S. border patrol a public good or a private good? Why? How about satellite TV? Explain. Public goods are nonrival (one person’s consumption does not prevent consumption by another) and nonexcludable (once the goods are produced nobody—including free riders—can be excluded from the goods’ benefits). If goods are nonrival, there is less
4‑4 (Key Question) What are the three major legal forms of business organization? Which form is the most prevalent in terms of numbers? Why do you think that is so? Which form is dominant in terms of total profits? What major advantages of this form of business organization gave rise to its dominance? The three legal forms of business organizations are: sole proprietorship, partnership, and corporation. Proprietorships are the most prevalent. They are easy to start (relatively low cost), often don’t require a large customer base to be profitable, and provide maximum freedom for the proprietor to do what she/he thinks best. Corporations are dominant in terms of total profits. They can access large amounts of money by issuing stocks and bonds; their limited liability is attractive to potential owners; their size and broader ownership base help ensure continuity that helps to build a large customer base and gain cost advantages (a preview for economies of scale).
4-9 (Key Question) What are the two characteristics of public goods? Explain the significance of each for public provision as opposed to private provision. What is the free-rider problem as it relates to public goods? Is U.S. border patrol a public good or a private good? Why? How about satellite TV? Explain. Public goods are nonrival (one person’s consumption does not prevent consumption by another) and nonexcludable (once the goods are produced nobody—including free riders—can be excluded from the goods’ benefits). If goods are nonrival, there is less