• Entry
  • Reader's guide
  • Entries A-Z
  • Subject index

Theory of the Firm

The theory of the firm is a basic economic concept that helps describe what motivates firms to act within the context of two basic markets: (1) the market in which they sell products and services and (2) the market in which they purchase the resource inputs for production. This theory assumes that all firms are motivated by profit, either its maximization or a determinable allowable amount. Thus, the theory of the firm explains why firms seek to minimize cash expenses in the face of the prices they are able to command in the competitive market where they compete for limited consumer income.

This entry describes how the theory applies in the changing economic environment facing K-12 public schools. What follows is a discussion of a ...

    • Loading...
    locked icon

    Sign in to access this content

    Get a 30 day FREE TRIAL

    • Watch videos from a variety of sources bringing classroom topics to life
    • Read modern, diverse business cases
    • Explore hundreds of books and reference titles