WEEK 1...• A monopoly is a market structure with only one seller of a particular product. • A monopoly is the opposite of pure competition. • Some monopolies are desirable because

High School Social Studies Grade 12

Economics

2019 – 2020

Extended Spring Break

Instructional Packet

WEEK 1

NAME _____________________________________________ DATE __________________ CLASS ___________

Chapter Summary

ESSENTIAL QUESTIONS: How do varying market structures impact prices in a market economy? Why do markets fail? How does the government attempt to correct market failures?

Economists describe markets by the number of firms that make them up and the degree of competition between them. When markets have robust competition, the supply of products meets the demand at a fair price. Occasionally markets may fail due to a variety of causes. The government can play a role in reducing such market failures. It can also take measures to protect consumers and regulate activities in restraint of trade in order to ensure markets are competitive and consumers are not taken advantage of.

Competition and Market Structures• Pure competition is characterized by very

large numbers of buyers and sellers, identical products, and ease of entering and leaving the market.

• Market supply and demand set the equilibrium price for goods.

• Monopolistic competition has all the conditions of pure competition except the products are not identical.

• Competition among companies is characterized by a strong effort to differentiate products.

• Oligopoly is a market structure in which a few very large sellers dominate the industry.

• Oligopolies tend to show interdependent behavior as firms follow each other's lead.

• Oligopolies compete on a non-price basis by emphasizing new or different features.

• A monopoly is a market structure with only one seller of a particular product.

• A monopoly is the opposite of pure competition.

• Some monopolies are desirable because society is better served by a monopoly or because geographic circumstances dictate that only one firm can succeed in a given locale.

Market Failures• There are five main reasons that a market can

fail: not enough competition; deficiency in information for consumers, businesspeople, and the government; the immobility of land,

capital, labor, or entrepreneurs; too few public goods; and the effects of externalities or spillover effects that undermine the market.

• Harmful spillovers can be dealt with through taxation, regulation, or other government action.

• Positive spillovers might be subsidized to promote the effect.

• A cost-benefit analysis enables government to evaluate spillovers.

The Role of Government• The government can play an important role in

maintaining competitive markets.

• The government can break up monopolies, prevent them from forming, or regulate them to protect consumers and ensure competition.

• The government can reduce practices that are in restraint of trade by promoting transparency so the public and other businesses have needed information.

• Various government agencies oversee business operations to help ensure fair business practices and safe and reliable products.

• Zoning laws and other local ordinances protect public health and the welfare of communities.

• Our free enterprise system is regulated and influenced by government to encourage competition and to protect consumers and the public from harmful business practices or the undesirable consequences of business activity.

Market Structures

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ECON16_TX_TC_C07_wschs.indd 1ECON16_TX_TC_C07_wschs.indd 1 8/14/14 1:23 PM8/14/14 1:23 PM

NAME _____________________________________________ DATE __________________ CLASS ___________

Assessing Background KnowledgeMarket Structures

Directions: Show your opinion of each of the following statements by selecting the choice that corresponds to how strongly you agree or disagree.

1. The government should not interfere with business competition because free competition among businesses will always result in the best prices and the best products for consumers.

a. Strongly agree c. Disagree

b. Agree d. Strongly disagree

2. Monopolies are always bad for the consumer, and none should be allowed to operate.



3. In 2008–09, the U.S. government invested billions of dollars to bail out auto

companies and banks to keep them from failing. This bailout was an appropriate role for our government to play.



4. Businesses that operate legally do not have any obligation to reimburse neighbors or other third-parties because of the inconvenience or negative side-effects resulting from their normal business operations.



5. The government has forced companies to recall baby cribs, car seats, and even cars because the items might be defective. It is appropriate for the government to take these actions to protect consumers, even when that means restricting business activities or forcing companies to pay millions to repair items.



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Econ16_TX_TC_C07_wsbk.indd 1Econ16_TX_TC_C07_wsbk.indd 1 8/14/14 1:24 PM8/14/14 1:24 PM

NAME _____________________________________________ DATE __________________ CLASS ___________

Comparing Prices among Competitors

Math Practice for Economics

Background information: The candy industry in the United States could be defined as an oligopoly

because just three companies make 99.4% of snack size chocolates. The big three companies are

Hershey's, Mars, and Nestle. All three companies use much of the same ingredients, so how do they

compete against one another? This is primarily done through price.

Directions: The two tables below show what a snack size chocolate costs from the various candy makers, big and small. Read the table below. Then, answer the following questions using the information in the table.

Hershey's Mars Nestle

Walmart215 ct. bag $13.88 = 6 cents each

230 ct. bag $13.88 = 6 cents each


Amazon100 ct. bag $12.81 = 13 cents each

55 pc. Bag $17.96 = 33 cents each


Candy Warehouse

210 ct. bag $35 = 17 cents each

157 pc bag $29.50 = 19 cents each


Godiva Russell Stover See's

Assorted bite size chocolates

70 pc. Box $90.00 = $1.29 each

18 pc. Box $12.99 = $.72 each

24 pc. Box $17.50 = $.73 each

(The prices in this chart were taken directly from the candy makers' websites)

Questions:

1. Why can the big candy makers produce candy that is less expensive per piece?

2. What is the most expensive chocolate per piece based on the tables above?

3. If your favorite candy is M&M’s, which are produced by Mars, where would you purchase the least expensive bag based on the chart above?

4. How does where you can purchase the candy affect the price? How does it affect the availability?

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Econ16_TX_TC_C07_wsmpe.indd 1 11/08/15 4:46 PM

NAME _____________________________________________ DATE __________________ CLASS ___________

Reteaching Activity

Each of the four market structures—pure competition, monopolistic competition, oligopoly, and monopoly—have distinct characteristics. Among them are the following:

•Number of firms—Some market structures include many firms, but some have only one.

• Influence on price—Some market structures allow firms to strongly influence price, whereas other market structures allow individual firms little control over price.

•Product differentiation—Some market structures are characterized by little, if any, difference among products, while others allow considerable difference among products.

•Ease of entry—Entrepreneurs can easily start a business in certain market structures, but find it almost impossible to enter others.

The following diagrams shows how pure competition, monopolistic competition, oligopolies, and monopolies compare. Look carefully at the diagrams and then answer the questions.

Which market structure most nearly describes each business?

1. A small farm located in an area with other farms

▫ pure competition ▫ monopolistic competition ▫ oligopoly ▫ monopoly

2. A fast-food restaurant that is part of a large national chain


3. The only restaurant in a small, remote town


4. A small, locally owned grocery store in an area with other grocery stores


Market Structures

Number of firms

Influence of price

Productdifferentiation

Ease of entryinto market

fewer

M

PC MC O

MPC MC

Market Structures

O

PC

PC = Pure CompetitionO = Oligopoly M = Monopoly

MC = Monopolistic Competition

MC O M

M

OMCPC

more

none extensive

none much

easier harder

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ECON16_TX_TC_C07_wsrt.indd 1 13/07/15 4:36 PM

NAME _____________________________________________ DATE __________________ CLASS ___________

Reteaching Activity cont.

Market Structures

5. Identify one firm that does business in your community and describe its characteristics. Then identify the market structure the firm operates in.

Firm:

Number of firms in the industry: (Ex. many, few)

Influence on price: (Ex. none, limited)

Product differentiation: (Ex. none, fair amount)

Ease of entry: (Ex. easy, difficult)

Market structure:

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High School Social Studies Grade 12

Economics

2019 – 2020

Extended Spring Break

Instructional Packet

WEEK 2

NAME _____________________________________________ DATE __________________ CLASS ___________

Chapter SummaryBusiness Organizations

ESSENTIAL QUESTIONS How are businesses formed and how do they grow? How does a market economy support nonprofit organizations?

Forms of Business Organization•A sole proprietorship is easy to start and run,

and the owner keeps all the profits.

•Disadvantages of a sole proprietorship are that the owner has unlimited liability, inventories are usually quite low, and there is limited scope for expansion.

•Partnerships, including general and limited, are fairly easy to start, and the two or more owners share responsibilities.

• In a general partnership, each partner bears full liability. In a limited partnership, partners bear liability to the extent of their ownership.

•Corporations, entities with the rights of individuals, are difficult, legally, to start. They often have shareholders who own common or preferred stock in the company, or company bonds.

•Those who start or work for a corporation have limited liability; the liability is the corporation’s not the owners’.

•Disadvantages of corporations are double taxation and the lack of input into running the corporation by its shareholders.

•A franchise is a temporary business investment that involves renting or leasing another firm’s successful business model.

•Buying a franchise requires an initial investment, often large, but offers the right to sell the successful business’s products or services using the business’s brand name.

•Using a franchise name and product or service may be profitable, but the franchisee must know how to run a business in order to make it successful.

Business Growth and Expansion•An income statement shows financial

condition of a business, including cash flow and depreciation.

•A business can reinvest positive cash flow to grow or to pay dividends to stockholders.

•Both horizontal and vertical mergers involve the merging, or combining, of two different companies.

•Companies merge to achieve faster growth, economies of scale, elimination of rivals, and diversification, among other reasons.

•A conglomerate is a combination through mergers of at least four companies, usually with highly diverse products and services.

•A multinational corporation is able to take advantage of its size and global scope to efficiently use resources and expand its markets.

• Incubators, often run by universities or government, offer all types of support for people who want to start their own business.

•A venture capitalist invests in new and promising start-up companies that, they hope, will grow and become profitable.

•Angel investors are individuals who invest a relatively small amount of money in a start-up company.

•Crowdfunding is a new phenomenon, based mainly on online social networks, in which a disparate group of interested individuals invest in a start-up.


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ECON16_TX_TC_C08_wschs.indd 1 07/07/15 2:21 AM

NAME _____________________________________________ DATE __________________ CLASS ___________

Chapter Summary cont.

Business Organizations

Nonprofit Organizations•Hospitals,religiousorganizations,andwelfaregroupsareoftennonprofitorganizationsthatusetheirresourcestoaidacommunityorcause.

•Cooperativesarevoluntaryassociationsthatconducteconomicactivitytobenefitmembers.Thereareproductive,consumer,andservicecooperatives.

• Laborunionsareorganizationsofworkersformedtorepresentworkers’interests.Theunionengagesincollectivebargainingwithemployersforthebenefitofitsworkermembers.

• Professionalassociationsofdoctors,architects,lawyers,andotherprofessionals,representtheinterestsoftheirmembership.

• Businessassociations,suchastheBetterBusinessBureauandlocalchambersofcommerce,actinthebestinterestoftheirbusinessmembers.

• Sometimesgovernmentprovidesgoodsandservices,asintheTennesseeValleyAuthorityandtheU.S.PostalService.Stateandlocalgovernmentsprovideservicessuchaspoliceandfireprotection.

• Indirectrolesofgovernmentincludedevelopingandenforcinglawssuchasantitrustlaws;provisionofstudentloans;andadministrationofprogramssuchasSocialSecurity.


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ECON16_TX_TC_C08_wschs.indd 2 07/07/15 2:21 AM

NAME _____________________________________________ DATE __________________ CLASS ___________


Enrichment Activity

Corporations are owned by the people who own stock in the company. As you have already learned, common stockholders have the right to vote on a board of directors, who then set broad policies and goals for the corporation. The excerpt below describes another way in which stockholders can influence the direction of a company.

Read the following text and then answer the questions below.

Reading: Stockholders Flex Their MusclesUntil recently, most shareholder meetings were rubber-stamping ceremonies for the corporate executives who spoke to the assembled stockholders. Rarely did a stockholder stand up and question or berate the actions of the corporate executives sitting on the dais. Since Congress passed the Dodd-Frank Act in 2010, however, stockholders have had the explicit right to challenge what they view as bad behavior by corporate executives. In the United States and Europe, stockholders have been exercising their newfound power, with remarkable results.

Some stockholders are mad, and they are making their displeasure known at the annual gatherings of corporate officers and shareholders, known as stockholder meetings. In many cases, stockholders with a majority of votes are so enraged by corporate behavior that they force the corporations to change.

Even if you own only one share of stock in a huge multinational corporation, you have the right to have your opinion heard at the annual stockholders’ meeting. If, as is happening more often, you are one of many hundreds or thousands of disgruntled stockholders, your collective power can change the conduct of the corporation.

The Dodd-Frank Act contains a specific provision—known informally as the “say on pay” provision—that empowers stockholders to question corporate officers’ compensation. If enough stockholders vote that a corporation’s chief executive officer (CEO) or other corporate officers are paid too much, or are given too much in bonuses, they can cut those corporate officers’ compensation.

That’s what happened to Citigroup’s high-profile CEO, Vikram Pandit, in 2012. At the annual shareholders’ meeting that spring, 45 percent of stockholders voted down Mr. Pandit’s $15 million compensation package. Although the disgruntled stockholders lacked a majority, the sheer volume of “no” votes made Citigroup’s Board of Directors sit up and take notice. The shareholder vote to reduce the CEO’s pay package is not binding, but the Board tends to take such widespread dissatisfaction seriously. The bad press such a “no” vote generates is another impetus to rein in excessive executive compensation, especially for a financial corporation doing as poorly as Citigroup. It seemed to many shareholders that Mr. Pandit’s take-home pay did not correlate well with his performance as chief executive officer.

Citigroup is not alone in experiencing stockholder revolt over inflated CEO compensation. In Europe, one-third of stockholders of the Swiss bank CreditSuisse voted against ballooning compensation for that bank’s executive officers. In the United Kingdom, shareholders of Aviva insurance voted down the pay package for the CEO, who soon after resigned. The chief executives of Britain’s Barclay’s Bank and the CEO of the easyJet airline company also have faced shareholder revolts against their bloated pay packages. Angry stockholders forced the CEO of a failing U.K. newspaper chain to resign after learning of the size of her compensation package—especially in light of the business’s downward slide.

In the United States, the revolt of Chesapeake Energy’s shareholders made headline news in the financial section of newspapers and websites. The shareholders voted to withdraw their support for two corporate directors who received enormous pay packages. Stockholders also cited poor corporate governance and lack of accountability as reasons for their ire. Surely, the stockholders protested, poor job performance should not be rewarded with astronomical bonuses and salaries.

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ECON16_TX_TC_C08_wsenr.indd 1 12/08/15 6:26 PM

NAME _____________________________________________ DATE __________________ CLASS ___________

Enrichment Activity cont.


Exorbitant—and sometimes underhanded—payouts to corporate officers even crop up during corporate mergers. In the United Kingdom, stockholders were outraged that, during negotiations for the takeover of Xstrata mining by the commodities trading giant Glencore, the deal included exorbitant payouts solicited by Xstrata executives. It seems that Glencore promised about £173 million (about $270 million) in bonus pay to 73 of Xstrata’s top officials to “sweeten the deal” and make the merger more palatable to the corporate elites. Executives should have allotted this enormous amount of money to the stockholders, whose outrage nearly nixed the merger and eventually led to the firing or resignation of several top Xstrata executives. Parties negotiated a new deal in which all bonuses would thereafter be linked to executive performance.

Questions

Directions: On the basis of your understanding of the text presented above, answer the following questions.

1. Identifying Cause and Effect How did the Dodd-Frank Act of 2010 embolden stockholders to confront CEOs and other corporate executives about what the stockholders viewed as excessive pay?

2. Interpreting Why did most corporate boards of directors pressure CEOs to resign, even though less than a majority of shareholders revolted to get them ousted?

3. Inferring During a merger, when one company buys another, who should be the beneficiaries of the money paid for the acquired company?

4. Researching Use the Internet to find other instances of stockholder revolts. What corporations experienced these revolts? Choose one corporation and write a short essay about what compelled the shareholders to revolt against the company. What were the stockholders angry about? What did they want changed? As you research, be sure to record your sources so that you can properly cite them.

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ECON16_TX_TC_C08_wsenr.indd 2 12/08/15 6:26 PM

NAME _____________________________________________ DATE __________________ CLASS ___________

Reinforcing Economic SkillsUnderstanding Buying and Selling Stocks

There is a whole host of variables, statistics, and data that are applied to and describe a stock, or a share of a corporation. Some are fairly straightfoward. Others are so complicated a person needs financial expertise (or a financial advisor or stockbroker) to know what they mean, how to interpret them, and especially to comprehend what they tell a potential investor about the stock and the corporation.

Directions: Read the short passage, then look carefully at the graph, which shows the changing price of stock in the corporation Facebook. After studying the graph, answer the questions.

Facebook is a fast-growing social networking site that first issued common stock for sale to the public in May 2012. The initial offering of stock is called an initial public offering, or IPO. Facebook’s website was gaining so many users so fast, its IPO became a major financial event. The stock offered in the IPO was in such demand it was sold almost exclusively to institutional investors, such as investment banks and brokerages. One investment bank that had studied Facebook’s financial condition priced the cost of a single share of Facebook’s stock during its IPO at $38. This price was based on Facebook’s “potential value” (estimated by the investment bank at $104 billion) even though the corporation had zero profits at the time of the IPO. The IPO price did not last long.

Since its IPO, Facebook’s stock has “roller-coastered” up and down, as all stocks do. Even though it now has more than one billion registered users, investors are concerned about how Facebook will make and increase its profits, which it gets mainly through advertising.

Imagine you had an account at a major investment bank and were able to buy Facebook stock at the IPO. You told the bank to buy $5,000 worth of Facebook stock for you at the IPO. Since then, you have carefully followed the value of your Facebook stock. You have wondered when or if you should sell it or buy more of it.

Sep2013

Oct 30,2013

May2013

Jan2013

Sep2012

May2012

15

20

25

30

35

40455055

FB

Facebook, Inc.

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Econ16_TX_TC_C08_wsres.indd 1 20/08/15 4:58 PM

NAME _____________________________________________ DATE __________________ CLASS ___________

Reinforcing Economic Skills cont.

Understanding Buying and Selling Stocks

Questions

1. How many shares did your broker buy for you at the IPO when she invested your $5,000 in Facebook stock? Assuming you can only buy “complete” shares (and not a fraction of a share), how much do you have left as “change” afterward?

2. What was the value of a share of Facebook stock a month after its IPO? How much were your shares worth then? How much did you gain or lose on this stock?

3. When did Facebook stock reach its lowest price? How much was it selling for then? If you had sold it then, how much would you have lost? What percentage of your investment would you have lost?

4. If you had bought an additional 100 shares of Facebook stock in early September when it was at its lowest price, how much would profit would you make on those shares if you sold them in October 2013?

5. If you had kept all your IPO shares of Facebook and sold them on the last day shown in this chart, how much would you have gained or lost on your Facebook stock?

6. What is the trend shown in the most recent (far right) part of the chart? Is there any way you can know from the chart whether Facebook’s stock price will go up or go down?

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Econ16_TX_TC_C08_wsres.indd 2 13/08/15 10:57 AM

NAME _____________________________________________ DATE __________________ CLASS ___________

Reteaching Activity

If you don’t want to go through all the legal and financial hoops of starting a corporation, and don’t have the right set of skills to run a business alone in a sole proprietorship, forming a partnership with someone who has business skills that complement your own may be a good way to go. Yet partnerships have their good and their bad points.

Suppose you decide to start a business partnership with a good friend who has solid business skills. Do you start a general partnership or a limited partnership? What are the advantages and the disadvantages of each?

Directions: Use the Venn diagrams below to note the advantages and disadvantages of both types of partnership.

Keep in mind important characteristics, including ease of creating the partnership, individual and collective liability, skills brought to the business by each partner, each partner’s workload, each partner’s management and other business responsibilities, efficiency, taxation, attracting capital, business size and ease of expansion, lifetime of the business, and potential for conflict.


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ADVANTAGES

General Partnership Limited Partnership

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NAME _____________________________________________ DATE __________________ CLASS ___________

Reteaching Activity cont.


Questions:

1. After reviewing your Venn diagrams, which type of partnership—general or limited—do you think has the greatest likelihood of failure?

2. Which type of partnership would you chose? Explain your answer.

C08_053A_664345

DISADVANTAGES

General Partnership Limited Partnership

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Documents

WEEK 1...• A monopoly is a market structure with only one seller of a particular product. • A monopoly is the opposite of pure competition. • Some monopolies are desirable because