what are the rules that are observed in the profit-maximising firms???
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. Profits uncertain:
The principle of profit maximisation assumes that firms are certain about the levels of their maximum profits. But profits are most uncertain for they accrue from the difference between the receipt of revenues and incurring of costs in the future. It is, therefore, not possible for firms to maximise their profits under conditions of uncertainty.
2. No relevance to internal organisation:
This objective of the firm bears little or no direct relevance to the internal organisation of firms. For instance, some managers incur expenditures apparently in excess of those that would maximise wealth or profits of the owners of the firm. Managers of corporations are observed to emphasize growth of total assets of the firm and its sales as objectives of managerial actions.
Also managers of firms undertake cost reducing, efficiency increasing campaigns when demand falls.
3. No perfect knowledge:
The profit maximisation hypothesis is based on the assumption that all firms have perfect knowledge not only about their own costs and revenues but also of other firms. But, in reality, firms do not possess sufficient and accurate knowledge about the conditions under which they operate.
At the most they may have knowledge about their own costs of production, but they can never be definite about the market demand curve. They always operate under conditions of uncertainty and the profit maximisation theory is weak in that it assumes that firms are certain about everything
The principle of profit maximisation assumes that firms are certain about the levels of their maximum profits. But profits are most uncertain for they accrue from the difference between the receipt of revenues and incurring of costs in the future. It is, therefore, not possible for firms to maximise their profits under conditions of uncertainty.
2. No relevance to internal organisation:
This objective of the firm bears little or no direct relevance to the internal organisation of firms. For instance, some managers incur expenditures apparently in excess of those that would maximise wealth or profits of the owners of the firm. Managers of corporations are observed to emphasize growth of total assets of the firm and its sales as objectives of managerial actions.
Also managers of firms undertake cost reducing, efficiency increasing campaigns when demand falls.
3. No perfect knowledge:
The profit maximisation hypothesis is based on the assumption that all firms have perfect knowledge not only about their own costs and revenues but also of other firms. But, in reality, firms do not possess sufficient and accurate knowledge about the conditions under which they operate.
At the most they may have knowledge about their own costs of production, but they can never be definite about the market demand curve. They always operate under conditions of uncertainty and the profit maximisation theory is weak in that it assumes that firms are certain about everything
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i m not satisfied
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If the producer wants to..maximise the profits he will supply more only at increased price..The higher is the profit from the sale..of a commodity..the higher will be the amount supplied by the firms..nd vice versa...
i want the rules that are observed
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