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From course:

Economics A Level (DONEEEEEEE)

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Question:

Why may a Firm which sets out Profit Maxing for the Long Run may use Sales or Revenue Maxing in the Short Run?

Author: eric_galvao



Answer:

-Firms maxing out their Revenue / Sales can increase their Market Share, or get Monopoly Power so they can make Supernormal Profits in the Long Run. Higher Sales may also make it easier to Borrow Money -Firms may even operate at a Loss in the Short Run to make a Profit in the Long Run. Firms can expect Revenue to pick up in the Future if they achieve substantial Brand Recognition or awareness. Or if Costs are reduced once new Production methods are brought about, or if costs can be lowered at higher levels of outputs (Economies of Scale) -Firms may be looking to Survive in the Short Run by getting Normal Profits. Once formally established, it can aim for maximum profits.


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