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Basic Structure of Firms and Industries - Coggle Diagram
Basic Structure of Firms and Industries
Econ vs Accounting Profit
Costs
Explicit
funds
Implicit
opportunity costs (depreciation, forgone interest, time)
Normal Profit
next best option is no better
Firm Types
sole proprietorships
single owner
high liability
local business, freelancers, artists
Partnerships
sole proprietorships with more people
law firms, physician groups, investment firms
Corportations
shareowners
double tax liability
Industry Types
Rev or Costs dependent on market power
2 ways to measure: four firm concentrations = sum of top 4 firm share percentages
Herfindahl-Hirschman index (HHI) = sum of all firms percentage shares squared
Perfect Compeition
lowest market power, many buyers and seller, and identical goods
free entry and exit
Monopolistic Competition
substitutability (different products)
easy entry and exit
Oligopoly
few sellers
different or identical products
difficult entry
Monopolies
single seller
barriers to entry ( no entry )