9-16-09 - Economics 448 Class Notes 9/16/09 ARTICLE REVIEW:...

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Economics 448 – Class Notes – 9/16/09 ARTICLE REVIEW : “The Nature of the Firm” – Ronald Coase Main argument (summary of Coase): There are costs to using the market (price mechanism). Why do firms exist? The main reason it is profitable to form a firm: there is a cost to using the market (the price mechanism) It is costly to use the price mechanism WHY DO FIRMS EXIST “The main reason why it is profitable to establish a firm would seem to be there is a cost of using the price mechanism” (pp. 93). Example : what if everything that happens at Allegheny College were not owned and maintained in a traditional firm organization? What if everyone just met at a place that we call Allegheny College (with Allegheny not actually being a firm)? I.E What if you had to use the price mechanism to accomplish or get every service or good you needed while at Allegheny College? Contract for classes and seats in the class, professors, office hours time, time to use the gym and gym equipment, food preparation, tutoring and Learning
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9-16-09 - Economics 448 Class Notes 9/16/09 ARTICLE REVIEW:...

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