In a word: businessmen maximize profit as a means to maximizing utility, so profit maximization follows from utility maximization" (Ormazabal). One may observe that this approach is quite similar to that of the new institutionalists a few decades ago, mentioned above. This approach considers that profit maximization does not seem to a primary objective for nowadays companies. Instead, profit maximization derives from utility maximization, being implied by it. Therefore, profit maximization is an implicit objective, not a primary one. The second approach is opposes the first one and was provided by Scitovsky in his paper "A Note on Profit Maximization and Its Implications." In Scitovsky's opinion, profit is maximized for its own sake, and this fact should be the starting point of any theory of profit. He considered...
The History of Economic Thought. Retrieved March 3, 2008. Available at http://cepa.newschool.edu/het/essays/product/Maxim.htm.
The red line denotes marginal cost and this also increases as the production increases. The shaded region is the profits of the firm. The price line is also the marginal revenue and the average revenue for the firm. So, the company earns profit only when marginal cost is less than the marginal revenue (the area denoted by the shaded portion). When marginal cost increases more than the marginal revenue,
Profit Maximization: An Actual or Theoretical Objective? Profits are necessary to day both for the capitalist socialist and any type of economy to survive. Multinationals and giant companies have the profit motive and therefore maximizing profit as the base of their operations. This also goes under a new label namely stock holder gain. This is a form of profits that happens when the profit margins of the company go up and
Business Economics Vincent There is a process by which there is both a decrease in the number of jobs that is increasing, and this is coupled with a global transfer of jobs to less developed countries. Both of these have an impact in the decrease in availability of jobs in the advanced countries. The latest news on this front is from the United States. On the 5th of the current month, there
Economics Discuss the alternative theories to profit maximization ranging from perfect competition to strict monopolies and discuss how these two special conditions are theoretical limits In economics, profit maximization is the process by which a firm determines the price and output level that returns the greatest profit. There are several approaches to this problem. The total revenue -- total cost method relies on the fact that profit equals revenue minus cost, and
Corporate Objective I do not think it is necessary to have a single-valued objective function. Maximizing firm value is not mutually exclusive to all other objectives, first. Second, that's like saying that human should only seek to maximize his or her net worth -- it's absurd. A corporation is an investment vehicle, yes, but that's not all it is. As for the idea that firm value maximization is the best objective
One set of concepts from each area was utilized to explain how the situation at Grand Bois may have come about. The end goal of the authors was to "provide business practitioners, ethics teachers, and readers interested in corporate conduct with insights useful in understanding why managers may act the way they do." It could be argued, according to Hamilton and Berken (2005), that Exxon managers had made a sound
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