A firm is an organization that combines and organizes resources for the purpose of producing goods and/ or services for sale. It is a combination of people, physical and financial assets, and information (financial, technical, marketing, and soon). People directly involved include stock holders, management, labor, suppliers and customers. In addition, all of society is affected by a firm’s activity, because businesses use resources that would otherwise be available for other purposes, pay taxes if operation are profitable, provide employment, and produce most of society’s material and services output.
Firm exist because they are very useful in the process of producing and distributing goods and/ or services. They are generally, economic entities whose activities can be analyzed in the context of an economic model. The basic model of the business organization/ enterprise is called the theory of the firm. According to classical version, the firm was thought to have profit maximization as its primary goal; the firm’s owner-manager was assumed (thought) to be working to maximize the firm’s short run profits. Now a day in modern society, the emphasis on profits was broadened to encompass uncertainty and the time dimension. The alternative objective, other than profit maximization are: value maximization, cost minimization, sales maximizations, manager’s utility maximization etc. We shall discuss in detail about the surveys of theories of firm below.
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