Explain the Two Different Motives That Firms Have for Choosing

question 37

Essay

Explain the two different motives that firms have for choosing the lowest-cost production methods to produce goods and services?
The first motive is that because inefficiency drives up costs and lowers profits,any firm wishing to will make great efforts to minimize production costs.These efforts will include using the right mix of labour and capital,given the prices and productivity of those resources.They also mean locating production facilities optimally to minimize production and transportation expenses.
The second motive is due to competition,consumers strongly prefer low prices and will shift their purchases over to the firms that can produce a quality product at the lowest possible price.Any firm foolish enough to use higher-cost production methods will go bankrupt as it is undersold by its more efficient competitors who can still make a profit when selling at a lower price.In other words,competition eliminates high-cost producers,and so firms are motivated to choose the lowest-cost production methods to produce goods and services.

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Definitions:

Oval Window

A membrane-covered opening that leads from the middle ear to the inner ear, transmitting sound vibrations to the cochlea.

Ossicle's Amplified Vibrations

The process by which the small bones in the middle ear amplify sound vibrations for hearing.

Cochlea

A spiral-shaped cavity of the inner ear that plays a key role in the process of hearing by converting sound vibrations into nerve impulses.

Reds And Greens

Often refers to color vision and the ability to distinguish between these two colors, which can indicate normal or defective color vision.