The limit to the size of the firm is set where its costs of organizing a transaction become equal to the cost of carrying it out through the market. … - Ronald Coase

" "

The limit to the size of the firm is set where its costs of organizing a transaction become equal to the cost of carrying it out through the market. This determines what the firm buys, produces, and sells. As the concept of transaction costs is not usually used by economists, it is not surprising that an approach which incorporates it will find some difficulty in getting itself accepted. We can best understand this attitude if we consider not the firm but the market.