Which of the following is a strategy commonly attempted by firms to increase their profits?

• A. Reducing production costs through improved efficiency
• B. Limiting access to new markets and customers
• C. Increasing the price of inputs purchased from suppliers
• D. Decreasing the quality of their products to reduce demand

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the goal of firms in microeconomics, which is typically to maximize profits. Profits are calculated as total revenue minus total costs.
2. Step 2: Analyze each option in terms of how it affects either total revenue or total costs. Increasing profits can be achieved by increasing revenue or decreasing costs.
3. Step 3: Consider 'Reducing production costs through improved efficiency' — this directly lowers the cost side of the profit equation, potentially increasing profits without reducing revenue.
4. Step 4: Evaluate the other options: 'Limiting access to new markets and customers' likely reduces potential revenue; 'Increasing the price of inputs purchased from suppliers' raises costs; 'Decreasing the quality of their products to reduce demand' would likely reduce revenue.
5. Step 5: Conclude that the strategy commonly attempted by firms to increase profits is to reduce production costs through improved efficiency, as it aligns with the goal of maximizing profits by lowering costs.