Question

Which maximization is very important assumption in managerial economics?

Answer 1

Answer:

The assumption of utility maximization is far more fundamental to price theory than is that of profit maximization.

The former is basic, the latter derivative. This might suggest that, where the two assumptions conflict, utility maximization must take precedence

Answer 2

Profit maximization is a very important assumption in ‘managerial economics’.

Explanation:

• The profit maximization is a process by which the firm decides on its price, input and final output levels during the short run or the ‘long-run period’.  

• The difference in the short run and the long run is that during the period of long run the quantities of all the inputs and the ‘capital are variable choices’.  

• In the short run period, the capital to be used is pre-determined by the ‘earlier investment decisions’.  

• The inputs that are used are labor and the raw materials that can be used in various combinations for the ‘production of goods’.

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