Question

How does a firm increase profits?

How does a firm increase profits?

Homework Answers

Answer #1

There are a few ways that a firm can use to increase the profit depending on the market they are operating,

  • In a perfect market the firm is a price taker and cannot set the price of the goods they can only set the quantity. ot maximise the profit they will try to reduce the cost of production and produce as mush as they can.
  • IN a monopoly market, the firm need to research and develop new products that they can sell in the market and thy will get profit even in the long run.
  • In a monopolistic competitive market, they will have to differentiate their goods to maximise the profit.
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