1. Show how different theories of the firm are more or less
appropriate depending on the questions being asked about firms.

This key to this question is to explicitly outline each of the
specific questions that each theory of the firm – neo-classical,
managerial, principal-agent, transaction cost and evolutionary theory
– addresses. For instance, neoclassical theory asks what is the impact
of changed market conditions. Managerial theory, focusing on the
internal structure of firms, aims to understand how the behavioural
conflict between owners and managers can be reconciled.
Principal-agent theory is concerned with why efficient contracts are
needed and how are they designed. Transaction cost theory of the firm
addresses the questions why do firms exists, and what determines the
boundaries of firms. Evolutionary theory is interested in what are the
factors affecting the growth of firms and industries. Correctly
identifying these issues is probably enough to pass. The answers
should be fleshed out by outlining the main assumptions underlying
each theory and describing how each theory attempts to answer the
specific questions it raises, or identifying the main contributions to
each of the theories. Some indication of the drawbacks of each of the
theories should also be presented, as should an acknowledgement that
the theories are not mutually exclusive, in trying to understand
firms. The greater the depth with which this material is presented,
the better the student should do.