Question

In the long run, managers have the time and flexibility to substitute their resources or inputs (such as labor, technology, building etc.) since all resources are variable. Hence, they are able to choose a cost-minimizing combination of resources to maximize profit. Do you think that this reasoning will apply to a non-profit making hospital? Justify your answer.

Answer 1

Non government organizations (NGOs) such as non-profit making hospital do not run their business for making profits. However as an organization, NGO also has costs such as labor, technology, rent etc. for which they constantly receive monetary grants from government. people and other private organizations. Manager of a non-profit hospital too can apply cost minimization strategy of other organizations for reducing its operational cost. However, any profits generated by a non profit organization is invested in the operation of organization. Therefore, the managers of NGOs will not apply cost minimization strategy to maximize their profits.