How could the assumption of profit maximization be justified?
A)The managers of a commercial firm who do not seek profit maximisation are more likely to lose their jobs, so only profit maximisers will survive.
B)Business scandals such as those that took place at Enron and Ahold prove the wrongness of this assumption; therefore nobody should try to justify it
C)It cannot be justified and is only an easy and common way to overcoming the difficulty to define the ultimate goal of the firm
D)It does not need to be justified because it is a basic assumption of business.

Question

Quizplus · Accepted Answer

In a competitive market, firms that do not maximize profits are less likely to survive because they cannot compete with those that do. The managers of a commercial firm who do not seek profit maximization are more likely to lose their jobs, so only profit maximizers will survive. Therefore, profit maximization can be justified as a rational and necessary business goal.

How Could the Assumption of Profit Maximization Be Justified