Discussion
According to Ronald Coase, why do firms exist ?
Answer: D
Firms exist to economize on transaction costs.
In 'The Nature of the Firm' (1937), Ronald Coase asked why, if markets allocate resources efficiently, so much activity is organised inside firms. His answer: using the market has costs, such as finding prices, negotiating and enforcing contracts. A firm replaces many market contracts with direction by a manager, and it grows until the cost of organising one more transaction internally equals the cost of using the market.
Specialisation, division of labour and diversification can all happen through markets, so they do not explain the existence of firms in Coase's account.
No comment is present. Be the first to comment.
Loading…
Post your comment
Please log in or register to post a comment.
Examination Categories
- SSC Exams
- Banking Exams
- Teaching Exams
- Civil Services Exams
- Railways Exams
- Engineering Recruitment Exams
- Defence Exams
- State Government Exams
- Police Exams
- Insurance Exams
- Nursing Exams
- Other Government Exams
- NRA CET
- PG Entrance Exams
- Campus Placement
- MBA Entrance Exams
- CUET and UG Entrance
- Judiciary Exams
- Regulatory Body Exams
- Software Development