Questions: In attempting to maximize profits, corporate executives and employees must distinguish between short-run and long-run profit maximization. What is short-run profit maximization?

The answer is A: A company may increase its profits by continuing to sell a product even though it knows that the product is defective.

Explanation for each option:

A. A company may increase its profits by continuing to sell a product even though it knows that the product is defective.

• This option describes a scenario where a company focuses on short-run profit maximization by prioritizing immediate financial gains over ethical considerations and long-term consequences. In the short run, selling a defective product might increase profits due to continued sales, but it disregards potential long-term repercussions such as damage to reputation and legal liabilities.

B. Even with lawsuits, large settlements, and bad publicity, unethical conduct will not cause profits to suffer because consumers understand that the cost of doing business is running the risk of lawsuits and bad publicity.

• This statement is incorrect as it underestimates the impact of unethical conduct on a company's long-term profitability. While some consumers might overlook certain issues, widespread unethical behavior typically leads to significant financial and reputational damage, affecting long-term profits.

C. A company may increase its profits by continuing to sell a product only if the product is not defective.

• This option does not align with the concept of short-run profit maximization through unethical means. Selling a non-defective product is a standard business practice and does not involve the ethical dilemmas associated with short-run profit maximization.

D. Because of lawsuits, large settlements, and bad publicity, unethical conduct will cause profits to suffer.

• This statement highlights the long-term consequences of unethical behavior, which is contrary to the idea of short-run profit maximization. It emphasizes that unethical actions can lead to financial losses over time due to legal and reputational issues.