ECON 2103 Chapter Notes - Chapter 22: Ronald Coase, Sunk Costs, Invisible Hand
Document Summary
22-1: a business firm is an entity that employs resources or factors of production, to produce goods and services to be sold to consumers, other firms or the government. Invisible hand is market coordination when individuals perform tasks based on changes in the market forces, such as supply, demand and price. Visible hand is managerial coordination when managers/supervisors direct employees to perform certain tasks. 22-1b: with firms, teamwork is better than the individual output. Sum of team production > sum of individual production. Shirking is the behavior of a worker who is putting forth less than agreed to effort. 22-1d: ronald coase says firms are profitable because there is always a cost of using the price mechanism. 22-1e: firms are all about markets and market transactions. 22-2: two sides to every business firm profit = total revenue - total cost. 22-2a: explicit cost cost incurred when an actual (monetary) payment is made.
