Sunday, April 18, 2010
Profit.
In class this past week we talked about how companies sometimes choose to opperate inefficiently. Why would a company intentionaly choose to do business in such a manner? Well, the simple answer is profit. At times, producing and selling at what is technically the market equilibrium and the most efficient point is actually less profitable for a business then opperating slightly under the efficient level. And as can be expected, a firm will generaly choose whichever route leads to the most profit. Afterall, a company's main objective is to make money, not neccessarily opperate efficiently.
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I agree that many firms, especially locally, will operate in the manner that will produce the most profits immediately. I am also taking a finance class that is focused on increasing the value of the company instead of focusing strictly on profits. Firms that are focused on value may produce and sell at the less profitable level if it is going to increase their value in the long run.
ReplyDeleteI too agree with your post and many firms do try and make profit as quickly as possible. Firms have to make a profit and this can get them through slow times in the market.
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