Ronald Coase Seminar

The Nature of the Firm

  1. What is the task that Coase sets for himself in "The Nature of the Firm"?
  2. What key criterion does Coase want his theory to meet? (p. 386)
  3. How does Sir Arthur Salter define the market? (p. 387)
  4. What is Coase's criticism of Salter's definition?
  5. Does the market system eliminate the need for planning? (p. 388)
  6. What question does this raise in Coase's mind?
  7. What is the distinguishing mark of the firm? (p. 389)
  8. What key question must be answered?
  9. What is the main reason Coase believes it is profitable to establish a firm? (p. 390)
  10. What sort of costs arise in market exchange?
  11. What impact does the establishment of a firm have on the number of contracts? Why? (p. 391)
  12. Why must entrepreneurs forecast?
  13. How does the length of the forecasting period affect the decision between using the market, entering into a short-term contract, or entering into a long-term contract?
  14. What flexibility does an employment contract give the employer?
  15. When is a firm most likely to emerge? (p. 392)
  16. Restate the middle paragraph on p. 392 in one sentence.
  17. What role does uncertainty play in the emergence of firms?
  18. How might the size of a sales tax affect the choice of operating through the market or operating within a firm? (p. 393)
  19. How does an entrepreneur react to larger or smaller costs of organization?
  20. Why does an entrepreneur not organize one more transaction, or one less? (pp. 393-94)
  21. What prevents firms from growing to monopoly size?
  22. "Why, if by organising one can elminate certain costs and in fact reduce the cost of production, are there any market transactions at all?"
  23. In modern economic lingo, what rule does Coase say entrepreneurs follow? (p. 395)
  24. Under what conditions will a firm tend to be larger? (p. 396)
  25. How does spatial distribution of transactions affect the decision to expand the firm rather than utilize the market? (p. 397)
  26. Is the "division of labor" the reason firms exist? (p. 398)
  27. What did Frank Knight argue would happen in the absence of uncertainty? (p. 399)
  28. How is uncertainty linked to the existence of the entrepreneur?
  29. What criticisms of Knight's approach does Coase make? (pp. 400-01)
  30. Why do upward-sloping cost curves not limit the size of firms?(pp. 401-03)
  31. What is the question an entrepreneur must always ask? (p. 404)