Final answer:
Companies may dispose of long-lived tangible assets because maintaining or updating them becomes uneconomical, particularly when repair costs are high or production becomes unprofitable. Additionally, disposals might occur in the context of managing collectibles, which may not always offer high returns in the long term.
Step-by-step explanation:
Companies may choose to dispose of long-lived tangible assets for various reasons, one of which is technological obsolescence, as highlighted by the shift in consumer demand towards more durable goods and products with lifetime warranties. In situations where manufacturing new items becomes prohibitively expensive, and repair costs are lower than replacement costs, a company may dispose of an asset that is no longer economically viable to maintain or update. This shift promotes long-lasting quality and the ability to upgrade or repair items efficiently, as evidenced by the desire for displays with high resolution and good color that do not need frequent replacement due to human visual acuity limitations.
Additionally, firms may also dispose of assets when operations are no longer profitable or sustainable, indicating a need to close rather than continue producing output. The decision is often related to the comparison of costs for new production and disposal versus repair or maintenance of the existing asset.
Collectibles, such as paintings or jewelry, represent another type of tangible asset that companies manage differently. These items can provide returns through their use or appreciation in value over time. However, they may not yield a higher-than-average rate of return in the long term, indicating that their disposal or retention should be considered carefully within the broader context of asset management and investment strategies.