The Alchian and Demsetz Theory of Why Business Firms Exist

question 242

Multiple Choice

The Alchian and Demsetz theory of why business firms exist suggests that

• A)there are only advantages to team production.
• B)disadvantages of team production may outweigh the disadvantages of individual production.
• C)individual production is more efficient than team production.
• D)the sum of team production is sometimes greater than the sum of individual production.

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Definitions:

Net Income

The final amount of profit a company makes after subtracting costs, taxes, and expenses from its gross revenue.

Fair Value

An estimated market value of an asset or liability based on current market prices or valuations.

Stock Investments

The purchase of shares in a company with the expectation of generating income or capital gains.

Insignificant Influence

Refers to a situation in which an investor does not have enough stake or power in an investee company to affect its decisions or policies.