Which fundamental economic concept explains why corporations exist as systems within an economy?

• A. Corporations facilitate specialization and division of labor, increasing efficiency.
• B. Corporations eliminate all forms of market competition.
• C. Corporations operate solely to maximize government revenue.
• D. Corporations guarantee equal distribution of resources among all individuals.

Answer: (A)

Verified step by step guidance

1. Identify the key economic concepts related to the existence of corporations, such as specialization, division of labor, efficiency, market competition, government revenue, and resource distribution.
2. Understand the concept of specialization and division of labor: this means breaking down production into distinct tasks performed by different workers or units, which increases productivity and efficiency.
3. Analyze how corporations function as organizational systems that enable specialization and division of labor by coordinating resources, tasks, and workers effectively within the economy.
4. Evaluate the other options by considering whether corporations eliminate market competition, operate solely to maximize government revenue, or guarantee equal resource distribution, and recognize that these do not align with the fundamental economic reasons for corporations' existence.
5. Conclude that the fundamental economic concept explaining why corporations exist is their role in facilitating specialization and division of labor, which leads to increased efficiency in production and economic activity.