Question

How could a firm increase profits?

Answer 1

A firm can also increase its profit by reducing the cost of producing output. This can be done by implementing cost effective production procedures. This may involve cheaper inputs like labour and capital also cost effective technologies.

Profit of a firm is given by T= Total Revenue - Total cost = (price of out butx quantity - - (cost perunit outfout & quantity) = (price of output a cost of out but bertan x (quantity sold) If we breakdown profit into its components, then we will get 3 part 1) Price of output positively related 2) Cost of outpout a inversely related 3) quantity > positively related Hence A firm com increase profit by increasing the price of the product which is possible as the firm has more control over the market for example, a monopoly pran can charge a higher price than a finm in. competitive market. In monopoly the firm in price setter where as in competitive market they are price taker.

The another way of increasing profit is increasing the quantity of output sold. This can be done by getting more share of the market which can be obtained by efficient sales procedure.