Answer to Question #212238 in Macroeconomics for Atee

Question

Business do not maximize output from the given inputs

Answer 1

Businesses do not maximize output from the given inputs

Profit maximization is not regarded as the ultimate objective of business since corporate social responsibility is considered paramount. If a company does not serve the client well or return it to the community, it loses its consumers. Therefore, this might lead to the eventual loss of profits if the company is not socially accountable. According to the traditional theory of the company, profit maximization is the company's primary aim, as price and production decisions connected with the company are normally based on the criteria for maximizing profit (Anand rt al., 2020). Maximizing profit is an optimization of the company's monetary revenue. For this purpose, the measures aimed at increasing profits and reducing profits must be adopted. Profit maximization is the measure of economic efficiency; it leads to the successful use of the few financial resources in every company and contributes to overall economic welfare since it enhances the economic efficiency of each company (Dhakal, 2019). Profit maximization is thus regarded as a fundamental objective for an investment decision.

The company's challenge of profit maximization differs from short to long-term. A term in which at least some manufacturing parameters are determined within what is known as "the short period." Thus the company cannot modify all elements in the near term – some are fixed at default values and cannot be changed. Thus just the number of (not fixed) variable inputs may be hired in this scenario. The company can select. For example, companies can produce production utilizing workers and plants, and the plant size is fixed in the long term (Anand et al., 2020). The sole variable of choice for the owner of such a company in the short term. In contrast, all elements vary in the long term so that the company may select how much all inputs can be hired, making its problem a little more difficult. The owner may select both the number of workers to be hired as well as the size (or quantity) of plants in our above example. There will thus be confusion in decision-making if profit maximization is considered as an objective of the company. The quantity of profit may be maximized by merely issuing shares and utilizing the earnings in the bill. It would, however, reduce income per share (EPS) (Dhakal, 2019). Therefore, this objective is not apparent whether the financial management should do this to maximize profit.

When the bulk of the enterprise sold finance, they created a profit maximization target in the 19th century. Its ownership and administration distinguish the contemporary firm. The owners and management are entitled and responsible to themselves. Therefore, a company cannot impose a profit maximization objective on shareholders (Zhang et al., 2017). In this environment, the profit maximization target is regarded as obsolete, non-ethical, impractical, complex, and inappropriate. It raises the conflict of interest between several shareholders, such as consumers, workers, the government, society, among others (Anand et al., 2020). Therefore, it is questionable that this leads to the best possible social welfare.

 

 

 

 

 

 

 

 

References

Anand, A., Singhal, S., & Singh, O. (2020). Optimal advertising duration for profit

maximization. Journal of Management Analytics, 7(3), 458-480. <span style="font-size:12.0pt;line-height:200%;font-family:&quot;Times New Roman&quot;,serif; background:white">https://www.tandfonline.com/doi/abs/10.1080/23270012.2019.1702904</span>

Dhakal, B. (2019). Is Profit Maximization An Appropriate Goal For Financial Managers? Arrow

of Performance. <span style="font-size:12.0pt;line-height:200%;font-family:&quot;Times New Roman&quot;,serif">https://arrowofperformance.com/2019/03/22/is-profit-maximization-an-appropriate-goal-for-financial-managers/</span>

Zhang, X., Chan, F. T., Adamatzky, A., Mahadevan, S., Yang, H., Zhang, Z., & Deng, Y. (2017).

An intelligent physarum solver for supply chain network design under profit maximization and oligopolistic competition. International journal of production research, 55(1), 244-26. <span style="font-size:12.0pt;line-height:200%;font-family:&quot;Times New Roman&quot;,serif; background:white">https://www.tandfonline.com/doi/abs/10.1080/00207543.2016.1203075</span>