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What is the purpose of firms in a market economy?

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Firms exist to organize tasks for which the transactions costs are too high to allow them to be organized on the open market. See Ronald Coase's The Nature of the Firm. read more

The purpose of firms is to utilize factors of production in order to provide a demanded or needed product. As firms are usually profit making, they provide a vehicle for capital growth as well, which also provide a vehicle for savings growth, and create wealth. As they provide employment, they help in circulation of wealth. read more

In a market economy, the purpose of all firms is to maximize profits. Although some firms are happy getting by on smaller profits, this is very rare in a market economy. read more

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