LOS g: Explain why firms are often more efficient than markets in coordinating economic activity.

Market coordination occurs when a firm employs resources outside the firm more efficiently than if they relied only on internal resources.  An example is through the coordination of more than one market such as the production of a rock concert which involves many different markets (e.g., marketing, vending, musicians, security, facilities procurement, etc.).

Firms can often coordinate economic activity more efficiently than markets because firms can reduce the costs of market transactions, and they can achieve economies of scale, scope, and team production.

Firm coordination occurs when a firm produces its product using resources within the firm. Market coordination occurs when resources outside the firm are used. For example, a firm may have other companies produce the components of their product (outsourcing) and the firm then assembles these outsourced components in-house.