1. Give an Example of a Firm’s Goal(S) in a Situation When They May Not Profit as Much in the Short-Run as They Would in the Long-Run

Only available on StudyMode
  • Download(s) : 163
  • Published : April 25, 2013
Open Document
Text Preview
1.Give an example of a firm’s goal(s) in a situation when they may not profit as much in the short-run as they would in the long-run. Why might a firm choose to do this? Give an example of this in Vietnam. (100 words)

Competitiveness is the core key for every business firm to remain in a particular market segment. There are too many rivals in the market, although the demand is still high. Price should be in the best and the firm with short-run oriented planning and implementation cannot afford the high marginal costs for its products, since the price of inputs is also going high for greater demand. For long run with strategic planning and implementation with further goal for later profits to come, the firm will invest and expand its plants and place large orders for inputs, the marginal cost will be much lower. All the inputs in this long run business are variable, which can help the firm to fully enter or get out of the market. This is the first condition to face challenges given by the other rivals. One more advantages of operating the business in long run is that an optimal mix between labor and capital can be fixed to maximize productivity and reduce unit costs. This can be implemented through the process of capital – labor substitution with improvements from machinery and technology. (References: Gregory Mankiw. March 2013. A sustainable Budget should endure from any storm. Retrieved from http://www.nytimes.com/2013/03/31/business/a-sustainable-federal-budget-should-endure-any-storm.html) For instance, in Viet Nam recently, there is great demand for leather belongings like hand purses, bags, belts, suitcase, etc. various firms have chosen to join this large and new market. A specific firm is facing the situation to make the decision regarding plan the manufacture for this product line in short run or long run. With the final price for the product is fixed and competitive, it is better for the firm to join the race in long run. The reasons are that it...
tracking img