Firms coordinate economic activity more efficiently than markets when firms have
A)lower transactions costs.
B)economies of scale.
C)economies of scope.
D)economies of team production.
E)all of the above

Question

Quizplus · Accepted Answer

All of the above factors contribute to firms being able to coordinate economic activity more efficiently than markets. Lower transaction costs allow firms to minimize the costs of negotiating and enforcing contracts with external parties. Economies of scale result in lower average costs as the firm expands production, while economies of scope enable the firm to produce a wider range of products and services at lower costs by sharing resources across different activities. Finally, economies of team production result from the ability of firms to coordinate the efforts of multiple individuals towards a common goal, without the need for explicit contracts or market transactions.

Firms Coordinate Economic Activity More Efficiently Than Markets When Firms