Nature of the Firm

question 43

Essay

Nature of the Firm. Amazon.com is a leading online retailer of books. The company also sells CDs, videotapes, audiotapes and other products over the Internet, and on proprietary online services like America Online. Amazon.com has a limited operating history upon which to base an evaluation of its business and prospects. The company's prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets such as online commerce.
A. Critics of Amazon.com allege that the company is "merely" an information processing device for bringing together book wholesalers and customers. Would Ronald Coase agree that this is a shortcoming of Amazon.com?
B. In what way must Amazon.com be efficient if it is to enjoy long-term success?

---

Definitions:

Cost Of Goods Sold

The total cost of manufacturing or acquiring products sold during a specific period, including materials, labor, and overhead.

Balance Sheet

A financial statement that summarizes a company's financial position at a specific point in time, detailing assets, liabilities, and shareholders' equity.

Sales On Account

Transactions where goods or services are sold but payment is deferred to a future date, typically recorded as accounts receivable.

Cost Of Goods Sold

Costs directly related to creating products for sale by a company, encompassing expenditures for labor and materials.