ABSTRACT
The purpose of this chapter is to introduce the business corporation and to develop the standard theory of the firm. Diminishing returns to capital is mentioned; the optimum size of the firm is defined; economies and diseconomies of scale are discussed. Profit maximisation is mentioned as the driving motive of the firm. Total, average and marginal costs and revenues are introduced, and this analysis is used to contrast perfect competition, monopoly and oligopoly. Cartels, price stickiness and game theory are reviewed, predictions offered and criticism of big business is discussed. The expansion in size of firms via internal and external growth is mentioned. Multinational corporations and global supply chains are analysed.
