(BQ) Part 2 book "Microeconomics" has contents: Output and costs, perfect competition, monopolistic competition, uncertainty and information, economic inequality, markets for factors of production, economics of the environment, public choices and public goods,.and other contents. | PART FOUR Firms and Markets After studying this chapter, you will be able to: ᭜ Explain what a firm is and describe the economic problem that all firms face ᭜ Distinguish between technological efficiency and economic efficiency ᭜ Define and explain the principal–agent problem and describe how different types of business organizations cope with this problem ᭜ Describe and distinguish between different types of markets in which firms operate ᭜ Explain why markets coordinate some economic activities and why firms coordinate others 10 I n the fall of 1990, a British scientist named Tim Berners-Lee invented the World Wide Web. This remarkable idea paved the way for the creation of thousands of profitable businesses that include Facebook and Twitter, Apple, Microsoft, Google, and Yahoo!. Some of these successful firms sell goods and others sell services. But many firms, especially those that you can name, don’t make the things they sell: They buy them from other firms. For example, Apple doesn’t make the iPhone. Intel makes its memory chip and Foxconn, a firm in Taiwan, assembles its components. Why doesn’t Apple make the iPhone? How do firms decide what to make themselves and what to buy from other firms? How do Facebook, Twitter, Apple, Microsoft, Google, Intel, Foxconn, and the millions of other firms make their business decisions? In this chapter, you are going to learn about firms and the choices they make. In Reading Between the Lines at the end of the chapter, we’ll apply some of what you’ve learned and look at some of the choices made by Facebook and Yahoo in the Internet advertising game. ORGANIZING PRODUCTION 227 228 CHAPTER 10 Organizing Production ◆ The Firm and Its Economic Problem The 20 million firms in the United States differ in size and in the scope of what they do, but they all perform the same basic economic functions. Each firm is an institution that hires factors of production and organizes those factors to produce and sell .
