Final answer:
Firms can be profitable and still go bankrupt due to poor management and changes in the market.
Step-by-step explanation:
In a market economy, some firms may file for bankruptcy and still continue operating. This may seem paradoxical because bankruptcy implies financial insolvency. However, there are several reasons why a firm can be profitable and still go bankrupt.
One reason is poor management. Even if a firm is making a profit, if it has high expenses, inefficient operations, or excessive debt, it may struggle to meet its financial obligations and eventually go bankrupt.
Another reason is changes in the market. Consumer preferences and demands can shift, making it difficult for a firm to sell its products or services. This can lead to a decline in sales and ultimately bankruptcy, even if the firm was initially profitable.