Alternative Theories to Profit Maximization - 1839 Words

Alternative theories to profit maximization ranging from perfect competition to strict monopolies. Companies and The Market Most companies are profit oriented. Companies survive and live on profit. Even governmental institutions, NGOs and NPOs are profit oriented, what they do with profit is different though. Saying this means that companies seek always to be at a position where profit is maximized. As we know by now this happens when MC=MR but this is an always changing point as supply and demand are dynamic, effectively meaning that if firms get it right once they cant just do the same eternally, they still need to adapt to every market factor as a new change is a new reality all together that needs to be studied and addressed. All†¦show more content†¦One step away from perfect competition is monopolistic competition. This type of market structure has a number of different characteristics from the above. Which turn it into one of the most used market structures. In this scenario, companies are not all price takers and start making use of economies of scale in order to improve efficiency, reduc e costs and increase profits. In the scenario companies sell a differentiated product at different prices. Like in perfect competition no barriers are put to entry and newcomers a constant threat to the market keeping every player always in search for a better mean to produce and compete. An oligopoly, is when there are only a few number of companies that control a specific market. The barriers to entry can be both legal/political (ie. number of licenses awarded to cell phone operators) to the fact that the companies themselves create a cartel like attitude effectively brushing of the market new entrants through aggressive measures like undercutting pricing on new smaller entrants, controlling inputs for production, etc. On the other end of the market structures are monopolies. Monopolies are generally quite inefficient in the sense that consumers dont have a choice in terms of what to consume and generally speaking dont offer good value for money as the company dictates the price of the good irrespective of cost (as weShow MoreRelatedEconomics1185 Words   |  5 Pagesa Diseconomy of scale, which is when the firm are forced to produce units for Increase per unit cost. Moreover the LRAC contains SATC’s that are spread out over a larger range of output. 3. Question 3 Profit equals total revenue minus total cost. Every firm want to maximize profit, to do so they should keep producing more outputs as long as additional units maximize revenue than it adds to cost. Economists call the added revenue marginal revenue, which is the change in total revenue thatRead MoreWhy Do Firms Grow.928 Words   |  4 PagesThe traditional profit maximizing theories of the firm have been criticised for being unrealistic. As a result, alternative theories of the firm were introduced (Sloman Sutcliffe, 2001). One of the alternative theories of the firm is Growth maximization. Following are the main motives for the firms to grow: ïÆ'Ëœ The cost motive: A growth maximising firm can lower its long run average costs by exploiting economies of scale and economies of scope. Economies of scale come into effect when increasingRead MoreProfit Maximization Is Concerned With Marginal Income Essay1638 Words   |  7 PagesProfit maximization is concerned with the marginal revenue equaling marginal costs. I believe that in a lot of ways price discrimination does seek to embody the concepts of price maximization. Since different consumers do have varying degrees of demand, price discrimination seeks to charge the maximum that each person willing to pay. This strategy is often referred to as optimal pricing. When price discrimination is used, the airline will inevitable get some people to pay above the equilibrium priceRead MoreMonopoly : Monopolistic Market Situation1126 Words   |  5 Pagesabsence of alternative or substitute suppliers (Trageks, 2010). The case scenario in this study presents a monopolistic market situation. The fact that Futures Unlimited Corporation is the single license owner approved to distribute and control plutonium presents a monopolistic situation. Monopolistic markets post different results on organizations depending on the company s management decisions. Although many monopolies employ the single price strategy in ensuring the maximization of profits, the effectivenessRead MoreUse Of Mathematics On Economic Profit Maximization1269 Words   |  6 PagesEconomic Profit Maximization Introduction: Economics is a social science that deals with how individuals, governments, firms, and nations make decisions on allocating scarce resources to satisfy their unlimited wants. Economists use theories and mathematical models to provide solutions to many problems in decision making and forecasting in economics. I have decided to take a look at how math is used in the study of economics, specifically in economic models such as the profit maximization model orRead MoreOptimization and Linear Programming1499 Words   |  6 PagesDQ 17 A common form of the product-mix linear programming seeks to find the quantities of items in the product mix that maximizes profit in the presence of limited resources. -True Linear programming helps operations managers make decisions necessary to allocate resources. -True In linear programming, the unit profit or unit contribution associated with one decision variable can be affected by the quantity made of that variable or of any other variable in the problem. -False What combinationRead MoreWHY do business internationalise1149 Words   |  5 Pagesresource in order to profits maximization. The Internationalization motives include three points: to find the new customers and market for existing products and services; looking for low-cost resources and labour; build the core competitiveness. Next, the mainstream and alternative international business theory will be compare and contrast to answer why do business internationalise. Companies have many different ways to enter the international market. The new trade theory indicates that earlyRead MoreFishery Production Analysis1624 Words   |  7 Pagesor may not be intended. Introduction Fishery production has been analyzed extensively in the past, with both financial and sustainability interests providing ample motivation for investment in such research. Fisheries, which are driven by profit maximization behaviour, contribute significantly to the overall economies of many countries, which has subsequently led to increased concern of over-fishing and depletion of global marine stock. Governments must balance industry subsidies and regulationsRead MorePricing Policy1429 Words   |  6 Pagesprices in the market. This approach to pricing enables companies to either fit costs to prices or scrap products or services that cannot be generated cost-effectively. Through systematic pricing policies and strategies, companies can reap greater profits and increase or defend their market shares. FACTORS INVOLVED IN PRICING POLICY The pricing of the product involves consideration of the following factors: (i) Cost Data in Pricing: Cost data occupy an important place in the price setting processesRead MoreCognitive Economics : Behavioral Economics1115 Words   |  5 Pagesinter-temporal choice. Inter-temporal choice describes to how humans decide about what and how much to do at different times when decide at a time effect the facilities available at another time. Choice under risk or ambiguity relates the dual-system theory. Research suggests that people’s decisions can be affected by the â€Å"type and amount of information† they find. A behavioral equilibrium depends on people take from frequently acts their equilibrium strategies. Emotions, ethics, justice, well-being