Ronald Harry Coase, an Emeritus Professor of Economics at the University of Chicago Law School. Dr. Couse was awarded a Nobel Prize in Economics in 1991 for his work in the field of the Theory of Market Institutions contributing to the line between economics, law and organization. The foundations of Couse’s beliefs were that serious economists should not study theoretical markets and instead should concentrate all their efforts on real world markets. Dr. Coase is best known for two well-established articles "The Nature of the Firm" (1937) and "The Problem of Social Cost" (1960). The book itself if a collection of these two critically acclaimed articles and three additional articles; “The Marginal Cost Controversy” (1946), “Industrial …show more content…
Coase’s main points brought together in his introduction and additional notes, but drawn from his scholarly articles begin with the concept that the choice between how a firm is organized and how the market is organized is varied and will continue to be varied, but not because of changes in technology. Instead, both individual firms and the market as a whole are organized so that each attempts to minimize or economize inherent transaction costs. Coase goes on to explain that the study of these tangible and material transaction costs is actually a study of opportunity cost. Charlie Munger, Warren Buffet’s less media attention grabbing partner, explains opportunity costs very succinctly and points a finger in the eye of economic professors; “Everything is based on opportunity costs. Academia has done a terrible disservice: they teach in one sentence in first-year economics about opportunity costs, but that’s it. In life, if opportunity A is better than B, and you have only one opportunity, you do A. ” This is Coase’s point, that firms and the market deal with the information at hand and make decisions in a world of scarce resources. Given a choice between A and B, then the one with the maximized value will be logically chosen every time. If in the real world study of a firm or market that the logical choice wasn’t chosen, then the economist has not values all the tangible benefits and costs that were weighed by decision makers,
The author of this book, Gary R. Collins, has done an amazing job of covering almost every conceivable topic that would be of relevance in the ministry. Simply looking over the table of content will make this point clear. Of course one might suggest other topics that were not covered, but again Mr. Collins has done a masterful job covering as many topics as he has.
McGuigan, J.R. Moyer, R.C. & Harris, F.H. deB (2014). Managerial Economics; Applications, Strategies and Tactics (13th ed.). Stamford, CT: Cengage Learning
Opportunity cost is when there are multiple options for something and there are two or more that are the best or very, very, opportunity cost is the value of not doing the next best thing. for example Anthony is either going to have a bake sale or work at Arby's, at Arby's he gets a fry and a drink along with 50 % but the bake sale is estimated to make 100$-200$ and costs 50$ so Anthony's opportunity cost for the bake sail is 50$ and some food while the opportunity cost of the Arby's is 50$-150$. For Anthony to make a smart business decision he needs to know which would be more profitable in the long run: food that causes diarrhea or the foothold in the community of being a baker. Another example of opportunity cost is the classic go to college
They went on to state that competition would not solve this dilemma. This lead to a re-evaluation of the goal of corporations, from merely maximizing revenues, to maximize the value of the firm, as it was determined in the stock market.
Choice is being influenced by the transformation of technology and business is being transformed by choice.
Opportunity cost is the value of the next best alternative in a decision. Imagine that you have $150 to see a concert. You can either see "Hot Stuff" or you can see "Good Times Band." Assume that you value Hot Stuff's concert at $225 and Good Times' concert at $150. Both concerts cost $150 per ticket, but it would take you a couple of hours to drive to Hot Stuff's concert and you have to be in school (the next) morning for an exam. Good Times' concert is right here in town. Explain how you would assess the opportunity cost of seeing Good Times in concert. What is the opportunity cost of going to Good Times' concert?
o Coase Theorem: A firm exists because, in a world of positive transaction costs, it is sometimes more efficient to organize
In business it is essential for owners to consider important factors when mapping out their business objectives. Economics used as a tool to solve coordination problems. They include what and how much product to produce, how to produce their product, and for whom they are producing. In order to effectively answer these questions, economics is used. Colander (2006) describes economics as “the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society” (p. 4). The foundation of economics is based on several factors that assist in understanding an economy.
When companies are making decisions, the companies do not worry about how the rivals will react, in part to each company’s actions are unlikely to affect its rivals to a great extent hence they are independent. In addition, there is perfect knowledge in the market hence new companies have the freedom to enter into the industry. The companies are also profit maximizers, producing output where marginal revenue equals marginal cost; the profit maximising condition. Companies in a
Opportunity cost is the value of next best option. Giving up one thing to do something else.
The combination of five factors in Yale’s investment philosophy plays an important role to Yale’s successful investment performance. However, among the five factors, the most critical and non-replicable factors are Yale’s ability to identify and invest in inefficient markets and to hire superior managers with aligned incentives; all of which came from expertise and years of experience in the industry. David Swansen’s expertise, in particular, plays a big role.
Marginal Utility by definition is the additional satisfaction a consumer gains from consuming one more unit of a good or service, which is usually positive, but can be negative. The concept implies that the utility or benefit to a consumer of an additional unit of a product is inversely related to the number of units of that product he already owns. The notion of marginal utility originated with attempts by 19th-century economists to examine and describe the economic validity of price. They believed price was partially determined by a commodity’s utility, which led to a paradox when applied to predominant price associations. This problem, commonly referred to as the
Competitions are ubiquitous. It may be in the form of us seeking a promotion at work, company competing for bigger market share. In fact, humans more often than not ,seek to achieve a superior position relative to others in a variety of contexts (Garcia, Tor and Schiff, 2013). Simply put, an undertaking with an aim of establishing gain by hindering the competitive edge of the rival party involved. In economic sense, in a marketplace, there are buyers and sellers for a product existing at variance, which would allow the price of products to change to counter the change in supply and demand. In todays times almost every product has a substitute alternative, hence, a buyer would have the convenience of switching to the cheaper alternative if price of a product becomes unaffordable for them. Hence, the buyers have relative influence on the price of the products. However in some industries there are only a few supplier of the products and services, due to the absence of substitutes, which reduces the bargaining power of the consumers on the price of goods, due to the producers having absolute power over the pricing of the goods.
Most companies are profit oriented. Companies survive and live on profit. Even governmental institutions, NGO's and NPO's are profit oriented, what they do with profit is different though. Saying this means that companies seek always to be at a position where profit is maximized. As we know by now this happens when MC=MR but this is an always changing point as supply and demand are dynamic, effectively meaning that if firms get it right once they can't just do the same eternally, they still need to adapt to every market factor as a new change is a new reality all together that needs to be studied and addressed. All
Proponents of the knowledge-based theory of the firm point out that this one sided concentration on incentive conflicts in the economics of organizational literature overlooks the production side of the firm. Langlois and Foss, for example, argue that the literature has unreflectively relied on a dichotomy between productive aspects and exchange aspects of the firm, that is, on a dichotomy between production costs and exchange costs. In analyzing exchange costs the literature recognizes that exchange itself is not costless, but involves transaction costs from imperfect knowledge and opportunism. But in analyzing production costs, there has been an embedded agreement that price theory tells us all we need to know about production. As Langlois and Foss point out, however, it is very likely that knowledge about how to produce is imperfect and that knowledge about how to link together one person’s (or organization’s) productive knowledge with that of another is imperfect. These twin issues of capabilities and coordination are discrete from the hazards of astringent that other traditional beliefs have focused on. Both knowledge resources and (imperfect) production costs can be said to vary depending on the attributes of a production process, in the same way that transaction costs differ depending on the asset attributes of investment projects. Thus, instead of holding technology constant across alternative modes of organization as a