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The maximization of producer surplus can in some cases reduce consumer surplus. [15] Some forms of producer profit maximization are considered anti-competitive practices and are regulated by competition law. [15] Maximization of short-term producer profit can reduce long-term producer profit, which can be exploited by predatory pricing such as ...
Given that profit is defined as the difference in total revenue and total cost, a firm achieves its maximum profit by operating at the point where the difference between the two is at its greatest. The goal of maximizing profit is also what leads firms to enter markets where economic profit exists, with the main focus being to maximize ...
Shareholder value is a business term, sometimes phrased as shareholder value maximization.The term expresses the idea that the primary goal for a business is to increase the wealth of its shareholders (owners) by paying dividends and/or causing the company's stock price to increase.
A labour theory of value can be understood as a theory that argues that economic value is determined by the amount of socially necessary labour time while a subjective theory of value derives economic value from subjective preferences, usually by specifying a utility function in accordance with utilitarian philosophy.
In economics, the profit motive is the motivation of firms that operate so as to maximize their profits.Mainstream microeconomic theory posits that the ultimate goal of a business is "to make money" - not in the sense of increasing the firm's stock of means of payment (which is usually kept to a necessary minimum because means of payment incur costs, i.e. interest or foregone yields), but in ...
Profit maximization happens when marginal cost is equal to marginal revenue. This is the main objective of financial management. Maintaining proper cash flow is a short run objective of financial management. It is necessary for operations to pay the day-to-day expenses e.g. raw material, electricity bills, wages, rent etc.
Its operating profit as a percentage of sales—which measures how much profit a business makes on average per dollar of sales—saw a similar decrease from 8.7 percent in 2022 to 7.8 percent in 2023.
"Uncertainty, Evolution, and Economic Theory" was Alchian's first major article. It is hailed by most evolutionary economists as an important and seminal contribution to economic theory. Economists who consider the article a powerful defense of the assumption of profit maximization include Arthur S. De Vany, Harold Demsetz, and Benjamin Klein.