Uri has a hot dog stand in manhattan each day he

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Unformatted text preview: sert if he did have to “punch in” (using a time clock)? 1:07 P.M. Uri has a hot dog stand in Manhattan. Each day he sells between 300 and 400 hot dogs for $3 each. He just sold a hot dog to one of his regular customers, Sam. As Sam was paying for his hot dog and drink, he says, “You know, Uri, I bet you’d sell a lot more hot dogs if you charged $2.50.” Uri just looks at Sam and says, “It’s not about selling more hot dogs.” • If it’s not about selling more hot dogs, then what is it about? 157 07 (154-185) EMC Chap 07 11/17/05 5:13 PM Page 158 Focus Questions About Business Firms Why do business firms exist? What is a sole proprietorship? What is a partnership? What is a corporation? Key Terms business firm shirking sole proprietorship partnership corporation stockholder Why Do Business Firms Exist? business firm An organization that uses resources to produce goods and services that are sold to consumers, other firms, or the government. Business firms are organizations that use resources to produce goods and services that are sold to consumers, other businesses, or the government. Businesses typically are formed when someone has an idea about how he or she can earn profits by producing and selling a good or service. While many new businesses begin with just one person, most businesses exist because people working together can produce more than the sum of what individuals working alone can produce. Suppose 10 individuals each fish for a living. Each day each person catches 100 fish. The daily sum of fish caught by these 10 individuals is therefore 1,000 fish. One day one individual says to the others, “Instead of fishing alone, why don’t we form a team and fish together? We can specialize in doing different things. One person will make the nets, another person will navigate the boat, some people will cast the nets, and so on. I think that if we work together—if we form a team, so to speak—we will be able to catch 2,000 fish a day.” 158 Chapter 7 Business Operations asset limited liability board of directors franchise franchiser franchisee Let’s suppose this person is correct. Ten people working together can catch more fish (2,000) than the sum of these 10 people working alone (1,000 fish). This would be reason enough for the people to form a team. Another name for this team is a business firm. A business firm of people working together can be more effective than a group of people all working individually. Why Are Bosses Necessary? Business firms need bosses and employees: people who give the orders and people who carry out the orders. Why are businesses structured this way? Why doesn’t everyone have an equal say in what happens in the firm? To answer this question, let’s return to our team of fishers. Suppose that our 10 fishers agree to form a firm and fish together each day. They also agree to split their catch evenly among the 10 of them. If they catch 2,000 fish a day, for example, each person will get 200 fish to sell. Each fish sells...
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This document was uploaded on 01/16/2014.

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