W:6 role of firms

firm

organized form of business

Limited Liability Companies

shareholders w financial responsibly limited by amt invested in firm → Public limited liability companies are called corporations.→ shares traded on stock exchange

Sole proprietorship/ sole trader / individual firm

single owner who’s fin responsibility isn’t limited → demand and supply within the market determine worth of shares in stock market

limited company may have one or many shareholders

profit distributed according to prop of shares owned → share holders make some decisions??

Concentration of labor

employees can work in teams

Division of labor

employees can perform separate tasks within teams

Contracts for products

When sold in markets, they permanently transfer ownership of the good from the seller to the buyer

labor contracts

temporarily transfer authority over a person’s activities from the employee to the manager or owner → gives right to be directed to manager while at work

owners ( principals)

direct the activities of other participants in the firm through hiring managers (agents)

employment rent

economic rent a worker receives when the net value of their job exceeds the net value of their next best alternative → why unemployment is necessary

why firms are more successful

economies of scale & scope, outsourcing, diseconomies of scale

firms & economies of scale

cost advantage experienced by a firm when it increases its level of output. ( tech, comercial & demand advatages,)

horizontal growth

expansion at the same level of the supply chain

vertical growth / integration

expansion at different stages of the supply chain ( upstream - opening stores & downstream - aquiring product )