Markets versus firms: INDICATE TRUE OR FALSE BESIDE EACH OF THE 4 STATEMENTS A.) Transactions within...

Markets versus firms: INDICATE TRUE OR FALSE BESIDE EACH OF THE 4 STATEMENTS

A.) Transactions within firms operate as contracts. Market transactions are not contracts.

B.) Working in a firm involves accumulation of firm-specific assets that will be lost if the connection to the firm is severed.

C.) Markets involve a decentralization of power, while firms represent a concentration of economic power.

D.) It is possible to employ division of labor within firms, while it is not possible in markets.

Expert Solution

Answer A- This statement is false. A contract refers to an agreement which is made for sale or purchase of an item or service for a consideration and is legal. Thus, Market transactions being legal and done for a consideration are contracts.

Answer B- This Statement is True. As assets which are specific to a firm are required for it's opertion and it's management. But when it's connection with that specific firm comes to an end then those assets become of no use to the firm and thus are genrally disposed of or sold.

Answer C-This statement is True. Economic power mainly means controlling or influencing the economic behaviour by using the assets of economic use. As in a market the economic power is distributed to each and every firm while all the firms represent the concentration of economic power. One can measure economic power through GNP.

Answer D- This statement is True. Division of labor mainly means to distribute the power or processes to people who can perform them more efficiently and thus it proves to be more productive for the firm. In a firm different departments or units can be formed and division of labor can be done. While in markets such divion is not possible.

Rahul Sunny answered 1 year ago

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