Question

Profit maximization is not an operationally feasible criterion

Answer 1

The profit maximization concept does not specify clearly whether it mean short or long-term profit, or profit before tax or after tax. In addition, in the free economy and perfect competition, businessmen pursue their own interests to maximize the profit by utilization of resources in the efficient and effective way.Let us assume that the maximizing the profit means maximizing profit after tax, i.e., net profit as reported by income statement of the business firm. It should be understood that this would not maximize the welfare of the owners if some short-term actions were taken to improve profit. For example, the manager may sell some of the assets and then invest funds in low-yielding assets. The profit after taxes would go up in the short-term but the long-term

Answer 2

Answer:

it is absolutely true because

as profit maximization can be a short-term objective for any organization and can not be its sole objective.

Explanation:

The profit maximization concept does not explicitly specify whether it means short or long-term profit or profit before tax or after tax. Furthermore, in a free economy and perfect competition, businessmen pursue their own interests to maximize profits by using resources in an efficient and effective manner. Let us assume that profit maximization means maximizing profit after tax, i.e. net profit as reported by the income statement of the business firm. It should be understood that it will not maximize the welfare of the owners if some short-term action is taken to improve profits. For example, the manager may sell some assets and then invest the money in low-yield assets. Profit after taxes will increase in the short run but in the long run