A producer of photocopiers derives profits from two sources: the immediate profi

Question

A producer of photocopiers derives profits from two sources: the immediate profit it makes on each copier sold and the additional profit it gains from servicing its copiers and selling toner and other supplies. The firm estimates that its additional profit from service and supplies is about $300 over the life of each copier sold. There is disagreement in management about the implication of this tie-in profit. One group argues that this extra profit (though significant for the firm

Explanation / Answer

second view is correct because it is giving a long run profit to firm where as in first case firm will be only concentrating on profit at the beginning >>> drawback of first case is in this case we don't know the total profit and we are doing our prize reduction

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