The Firm and the Market The struggle for survival tends to make those organisations prevail, which are best fitted to thrive in their environment, but not necessarily those best fitted to benefit their environment, unless it happens that they are duly rewarded for all the benefits which they confer, whether direct or indirect. Alfred Marshall, Principles of Economics, considered the economic problem of the firm in splendid isolation. The firm received signals (prices of inputs, prices of outputs) from the outside world and responded blindly with perfectly calculated optimal quantities. The demand for inputs and the supply of output pertained only to the behaviour of this single economic actor. It is now time to extend this to consider more fully the rÙle of the firm in the market. We could perhaps go a stage further and characterise the market as the industryî, although this arguably sidesteps the issue because the definition of the industry presupposes the definition of specific...
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