Is this true or false? 1.To mximize profits, a firm should expand production as long as it is making profits.?

False- you will reach a point where profitability the amount of money made per dollar input will decline. (could be a supply, production, or input issue) examples (saturated market, lack of space for production and storage, overtime) respectively . You will reach a point where you have expanded production but would have made more money if you had stopped at a previous point. So that while you may continue to expand under your question may make sense in some situations


(your competition suffers a major production setback and you want to steal market share now in the hope of keeping some of it where you no longer have that advantage, in most cases the real world answer will lie somewhere along the decline of the profitability curve past its' peak.


Profitability is a hard concept sometimes. One of the best examples is big oil companies. Many people point to their record profits, but the truth is that these companies are so big to make that amount of money. If I had to depend on income from a company I would start I could go into a lot of things pharmacuticals, tobacco, computer chips , software or any number of things and make more money back for every dollar I put in than an oil company. example take a look at how much money Microsoft would make if it were the same size as Exxon (Exxon is about 2.5 times bigger) can you imagine Bill Gates sitting any higher up the richest person on the planet list? But I digress. Hope this helps.