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WEW-045

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Microeconomics Question from Walter E. Williams:Edit

The literature on the behavior of the firm poses it as a profit maximizer, a wealth maximizer, a growth maximizer, a sales maximizer, a sales maximizer subject to a prescribed profit rate. Which of these do you use (why?) and how do you manage to allow for these other assertions of firm behavior?

AnswerEdit

Profit maximization is the most general criterion of efficiency because it compares the value of what is produced with its cost, rather than merely minimizing the cost of what may or may no be worth its costs. It is feasible for a firm to maximize sales, wealth or growth and still operate at a loss. Ideally, it should maximize these things while at the same time maximizing profit.

Seems like there is room here to add Alchain (Uncertainty, Evolution, and Economic Theory).


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