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Profit maximizing firms and goods shortage

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For any general profit-maximizing firm with market power (i.e., a price-setting firm, such as Microsoft, Toyota, or Starbucks), why do we NOT expect to see on an ongoing basis shortages of goods or services provided by these firms? Explain briefly.

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Solution Summary

This solution gives reasons why profit-maximizing firms such as Microsoft, Toyota, and Starbucks rarely short supply of goods to markets.

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Shortage of goods in a profit maximizing firm is very rare because these firms have put in place systems that are very efficient. After all, a profit maximizing firm wants to have products ready when customers need them and at the time the products are need. In short, they have a very well designed just-in-time systems. Besides, these companies ...

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Edwin Sinclar, MBA
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  • MBA, Aspen University
  • Bachelor of Science , Berea College
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