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Goals of the Firm-Profit Maximization

The supposition that firms try to maximize the profits: (i) Is the beginning point for most of the economic analyses of how firms function. (ii) Can be wrong for the cases in which the professional corporate managers maximize their own self interests rather than the interests of corporate stock-holders. (iii) Leads to the testable predictions regarding firm’s responses to economic modifications. (iv) Can be wrong as entrepreneurs who open the proprietorships face a trade-off among leisure and the funds they could made by working continually. (v) All the above.

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