Suppose the utility function for a firm manager is U =  + bQ,where Q is output,  is profit,and b is a negative constant.How would the firm's output compare with what it would be if the manager's objective was to maximize profit?
A) It would be greater than the profit-maximizing output.
B) It would be less than the profit-maximizing output.
C) It would be the same as the profit-maximizing output.
D) None of the preceding statements is correct.

Question

Quizplus · Accepted Answer

The utility function includes a negative constant (b) multiplied by output (Q), indicating that the manager places a greater emphasis on non-monetary benefits (such as utility or satisfaction) than on profit. Thus, the output level chosen by the manager may be less than the profit-maximizing output level.

Suppose the Utility Function for a Firm Manager Is U