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Essay / Research Paper Abstract
This 4 page paper looks at the concept of profit maximization, considering the way in which you may be supported undermined by other theories, and discusses other theories such as revenue maximization and irrational behavior to explain why profit maximization may not be an accurate model for the way business takes place in the real world. The bibliography cites 6 sources.
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4 pages (~225 words per page)
File: TS14_TEcrprofitm.rtf
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of this (McNutt, 2008). In this concept there is the view of the firm with the ownership and control all being a single entity, with the profit maximization taking place
subject only to the market and the resource constraints (McNutt, 2008). However, there are many theories that indicate this is not the approach that is always find, indeed, it
may be compromised by many factors; one of the main factors being human nature. Arguments of Simon incorporate the irrational behaviour of humans, and the way that there may be
conflicting motivations, a theory which is supported by agency theory (Eisenhardt, 1989). There are different theories that are able to be put forward that incorporate the need to profits
to be made, but consider the way that may be balanced with other needs and goals, but profit needs to be a part of it, as without profit a firm
would not survive. It is the idea of a firms survival that is reflected in the work of theorists such as Baumol,
Marris and Williamson. Here there is acceptance the firms need to make a profit, but a different view on the main goals and the way that the profit is achieved
is considered, with goals other than profit maximization being advocated (McNutt, 2008; George, 1992). Marris and the gd model provides an interesting approach
focusing on the way a firm should grow (McNutt, 2008). Marris took the view that there was the potential to achieve and maintain an optimum growth rate where there was
an optimum dividend to profit ratio, resulting in shareholders that were satisfied where there is growth that does not create a cash ripe business due to the growth that is
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