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Economics ­ The Objectives of Firms (5.12.12)

Traditional View = Firm's want to minimise costs and maximise revenue in order to
maximise its profits

Later Views = Take into consideration the wider perspective of the firm's motivation

Profit ­ Maximising Output:

A firm wanting `profit-maximisation' will produce up to the…

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A firm's objectives:

Traditional View = A firms sole objective is to maximise its level of profits and suggests that
an entrepreneur will change levels of output every time there is a change in the level of
prices or costs

In a modern world concerned about negative externalities and the…

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If they don't = increase likelihood of a hostile bid
Hostile Bid = a bid to buy shares in an attempt to gain control of the firm which is
opposed by the firms directors who fear job losses
While the goal of profit maximisation mat not be an appropriate assumption,…

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The above factors make it almost impossible for a firm to make an accurate
assessment of whether it is profit maximising
Firms are therefore more likely to satisfice rather than maximise (make an acceptable
profit rather than achieve the maximum) ­ firm will not waste time & resources
seeking the…


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