Do firms really seek to maximize profits?
What will be an ideal response?
Profit maximization is difficult because management needs a great deal of information about revenue and cost in order to maximize profit. In addition, management may have other goals, such as philanthropy, or members of a management team may not always agree on goals or means to obtain them. Therefore, this assumption is an oversimplification.One suggested alternative goal is satisficing. As explained by Herbert Simon, this goal is common in much of industry and government. Because information is costly, firms may settle for less than maximum profit.
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Suppose water rates in Podunk rise by 100%. The water consumption in Podunk will tend to
A) remain unchanged, because water is a necessity of life. B) decrease substantially overnight. C) decrease more substantially over time, as residents discover substitutes for water. D) decrease, and therefore lead to a lower price of water.
The demand curve for bonds would be shifted to the left by
A) an increase in expected returns on other assets. B) a decrease in the information costs of bonds relative to other assets. C) a decrease in expected inflation. D) an increase in the liquidity of bonds relative to other assets.
A cottage industry exists in the home-manufacture of ‘country crafts'. Especially treasured are handmade quilts. If the fourth completed quilt took 30 hours to make, and the eighth quilt took 28 hours. What is the percentage learning?
a. 5% b. 6.7% c. 10% d. 100% e. 122%
Katya owns a math-tutoring business. Her accountant most likely includes which of the following costs on her financial statements? (i) workbooks containing practice problems (ii) rent for the storefront (iii) wages Katya could earn as a bookkeeper (iv) interest that Katya's money was earning before she spent her savings to set up the tutoring business
a. (i) only b. (i) and (ii) only c. (iii) and (iv) only d. (i), (ii), (iii), and (iv)