Why assume that firms maximize profit, when it is easy to find companies that pursue other goals such as saving rain forests (Ben and Jerry’s) and sponsoring Mister Rogers (Sears)?
What will be an ideal response?
Assuming that the two cited firms are not pursuing maximum profit (and that is not certain, since good PR may be a profit-maximizing tool), profit maximization is useful as a simplification of reality. We can learn much about the way firms operate, even if they do not behave this way all the time. Second, even nonprofit firms must pay attention to the bottom line. It is worthwhile for them to know how much profit is forgone if they choose a goal other than profit maximization.
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How does the imposition of a penalty for possessing an illegal drug influence demand, supply, price, and the quantity of the drug consumed?
What will be an ideal response?
Licensing and regulation of business activities by colonial governments
(a) occurred only infrequently. (b) was a common practice in early colonial times but the British eventually replaced it with a policy of laissez faire before the American Revolution. (c) was very common throughout the colonial period just as it is today. (d) is basically inconsistent with American concepts of freedom of enterprise and so has never been common practice in either colonial or modern times.
The features of the M-Form of firm organization are
a. divisions have difficulty responding to market changes b. it is difficult to maintain customer relationships c. there is less coordination across the firm's divisions d. evaluating employees is easier because managers typically are similarly trained
If a government-imposed price floor legally sets the price of milk above market equilibrium, which of the following will most likely happen?
a. The quantity of milk demanded will increase. b. The quantity of milk supplied will decrease. c. There will be a surplus of milk. d. There will be a shortage of milk.