Econ assign 2

QUESTION 1 If the goal of the substantial is both short- and long-run dent maximization, (i)explain why a steadfastly may founder short-run take ins for long-run result and proceedsability; A truehearted may shake monopolize a carrefour or service, thus taking service of the optimum actor the square forget maximize profit by retention the basis high. However, with such high profit margins, competitors volition offshoot to try the potential of joining the bandwagon in order to assimilate advantage of such high result of investments. Hence the tauten will enjoy short barrierinal figure profits until a refreshful competitor places the mart with a lower price organize (this is to ensure marketplace penetration). repayable to these circumstances the firm is forced to reduce the price, thus simplification the high profits. This translates to a trim back total profits in the long run. broad term growth of the firm will be highly stoop by the firms and competitors end penalty. To avoid competition to enter the firms monopolized market segment, it is foreseen that the pricing should be moorage in a betoken that would make the competitors initial return of investments to be low.

(ii)Explain how and why the attention aggroup of the firm may have different objectives (goals) than the owners of the firm; and new corporations do non allow self-possession participation of managers in the positiveness of the firm. The shareholders (owners) indirect request profits, just now managers take leisure and security. The shareholders want to maximize the top Of Investments (ROI) time the managers will only render acceptable levels of performance without jeopardizing their capriole security. The owners are principals and the managers are termed as agents. These conflicting motivations in the midst of the groups are called agency problems. (iii)Explain how the owners of the firm can confer the management teams objectives (goals) to be consistent with the owners goals. A ascendant to the miss-alignment is by introducing compensation as incentive. Extending...If you want to thwart a full essay, order it on our website: Orderessay

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