Why may a firm continue to operate even if it is incurring losses both in short run and long run?
- When it a beginner firm expecting to grow.
- When it has hope of recovering it losses in future
- When the firm is a pilot project or research firm will continue to operate regardless of losses made for the period of study.
- When the aim is to provide employment opportunities for the people other than profit maximization. In this case, as long as the desirable labour force is employed, such firm don’t close down.
- Sales maximization other than profit maximization. The firm continues producing provided the sales are higher.
- When the firm is government owned and their goal is socio-economic welfare of the population.
- When the firm is receiving subsidies from government in which case even though they are incurring losses, their expenditures are met by government
- When a firm is using profits earned from other sources to operate.
- When a firm hopes to change management in order to improve in future.
- When a firm hopes to secure a long term credit
- When a firm fears to lose its popularity/name, losses may be met by the shareholders
- When a firm fears to lose its customers.
- When a firm had accumulated profits and assets in the previous trading period
- When a firm fears to lose its assets
- When a firm fears to lose source of raw materials
- Fear of non-compensable depreciation of capital in case machinery is made redundant.
- It can be a non-government organization that depend on foreign aid or donations.
CATEGORIES Economics
TAGS Dr. Bbosa Science
