Profit maximization is an ambiguous guide to decision making in the private sector because:
A)firms in the private sector usually do not aim at profit maximization.
B)the goal of profit maximization contradicts the goal of satisfying the firm's shareholders.
C)of the presence of risk and uncertainty.
D)profit-maximization ignores social costs and benefits.
E)profit cannot be defined clearly.

Question

Quizplus · Accepted Answer

Profit maximization assumes perfect information and certainty, but in reality, there is always risk and uncertainty involved in decision making. Firms may also have other objectives besides maximizing profit, such as satisfying shareholders, customers or employees, promoting social responsibility, etc. Profit maximization also ignores externalities, such as social costs and benefits that may arise from production and consumption activities. While profit is a clear financial concept, its measurement and interpretation may vary depending on accounting methods and assumptions. Therefore, profit maximization cannot provide a clear and definitive guideline for decision making in the private sector.

Profit Maximization Is an Ambiguous Guide to Decision Making in the Private