Question

3) The managers of the Glenmorangie Distillery in Scotland advertise their single malt whiskey as “unnecessarily well made.” a. What do you think this advertising slogan means? b. If the slogan is literally true, have the managers maximized Glenmorangie’s profit? Why or why not?

Answer 1

It means that the product has very high quality standard.

The company has competitors in the market. The slogan indicates offering higher quality products out of the lot.

Maximizing profit can’t be done if the slogan is true.

This is the question of productive efficiency. A perfectly competitive firm can only achieve this by staying in a point where (Price = Minimum of average total cost). If higher quality products are produced, there might not be least-cost technology; it means quality improvement can only be done at the cost of higher cost. If this is done the company may not survive in competition also. The minimum of average cost can’t be achieved; therefore, profit maximization is not possible.