Final answer:
A firm combines inputs to create valuable outputs, aiming to generate profits through various activities such as manufacturing, transportation, and sales. Its decisions on pricing, production, and employment affect its longevity in the market.
Step-by-step explanation:
A firm, also known as a business or producer, is an organization that combines various inputs like labor, capital, land, and raw or finished materials to create outputs, which are goods or services. The prime objective of a firm is to ensure that these outputs are more valuable than the inputs, thereby generating profits.
The scope of a firm's activities can include manufacturing products, but it also extends to other value-creating services such as transportation, distribution, and sales. Firms make numerous important decisions regarding the prices they will charge, methods of production, the number of workers hired, financing strategies, and when to expand or downsize their operations. The ongoing success and the ability to yield profits will determine whether a firm will continue to exist in the market or cease operations.