Answer to Question #276711 in Microeconomics for cyah

Question

A firm may sacrifice short-run profits for long-run growth and profitability.

Answer 1

Solution:

A firm may sacrifice short-run profits for long-run growth and profitability in order to maximize sales and increase market share. An increased market share increases monopoly power by forcing rivals out of business and may enable the firm to increase its prices and make more profit in the long run.

A firm may also be willing to sacrifice short-run profits in order to increase in size, and gain more market share and enable higher profits in the future. Furthermore, more market share increases its monopoly power and ability to be a price setter in the market.