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The Nature Of The Firm By Coase Essay

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Below is an essay on "The Nature Of The Firm By Coase" from Anti Essays, your source for research papers, essays, and term paper examples.

The writing of R. H. Coase which is called “The nature of the firm” is about one of the greatest problem of economics of the past times which is connected with misunderstanding of some economic terms. At the very beginning of this text we become aware that the economic terms have to be both realistic and manageable in order for the people to be able to interpret it and moreover this term should correspond to the real world. Therefore Coase using the works of Sir Arthur Salter, Marshall, Clark and of other great economists tries to define the word “firm” as it is one of the most essential terms in economical subject. Moreover the writer tries to describe the nature of the firms, how they operate in the industries. The main his two approaches are that the activities of the firms is price-driven or coordinated by the entrepreneur. Meanwhile Coase asserts that there are some disadvantages of the price-driven mechanism of the firms. As those firms usually try to spend less money on different contracts they usually prefer the long period contracts rather than short period ones. Therefore some difficulties arise as the firm cannot anticipate all of the circumstances it may face in future.
Another question that the author investigates in this article is about the factors which affect the size of the company. And he concluded that the main source of the firm’s growth is the transactions that are controlled by price mechanism and organized by the entrepreneur. At the same time the company may become smaller if the entrepreneur decides to leave the organization of these transactions. This comes before Coase asks the question why does not entrepreneur undertake more transactions in order for the company to become larger. The reason is that the profits got from each additional transaction is smaller that from the previous one. Therefore it is not efficient   for the company to carry out more transaction. The optimal choice here is where the cost of undertaking the transaction...

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