Firms are organized to keep their costs as low as possible by
A)comparing external transactions costs with internal operating cost.
B)analyzing supply and demand conditions.
C)minimizing their use of borrowed funds.
D)utilizing the latest technology.

Question

Quizplus · Accepted Answer

Firms aim to minimize their costs in order to maximize profits. One way they do this is by comparing the costs of performing activities internally (i.e. within the company) versus outsourcing them externally (i.e. hiring a contractor or supplier). This analysis helps firms determine which activities are most cost-effective to perform in-house and which ones are best outsourced. By minimizing transaction costs associated with external activities, firms can keep their overall costs as low as possible.

Firms Are Organized to Keep Their Costs as Low as Possible