Firms Actions in Increasing Its Profitability and Producing High Quality Products - Assignment Example

Download file to see previous pages... The theory of a firm ensures that it regulates all the above-named factors in the company to ensure that they lead to the success of this firm. This principle focuses on using cheap and available inputs in the production processes since they reduce the cost incurred during production. They are also concerned with the methods that are used by the firm in the production process. For example, the products produced must be of very high quality since this principle is able to equalize on the inputs.
This theory articulates that all the firms will realize a great profit if they produce goods up to the point where the marginal revenue is equal to the marginal cost, whereas, the firm consumes all its factors of production to the point where the cost of production is at par with the marginal revenue. The theory is known to be the best in identifying the future of the firm, ensuring that it makes enough profit with time. The theory ensures that it studies the structure of the company and improves its relationship with the market for it to succeed in the future. The theory is also effective in answering some other economic questions such as how different firms come to emerge and grow in the economy, relationships between different firms and the markets, and how to improve the performance of a firm through its actions. The theory of a firm economic principle is very effective in ensuring that the costs incurred in the production process do not also exceed the earnings after production to prevent losses. The model balances between the internal and external transactions in every firm ensuring that the firm is able to grow with time (Suárez 2012). For example, it is through this principle whereby the external transactions are always made to cost higher compared to the internal transactions for the firm to grow.
There are various economic principles, which can be used to explain why the prices of maize fluctuated greatly over the period in the past five years.    ...Download file to see next pagesRead More