Bus 3360 - Study guides, Class notes & Summaries

CHAPTER 1 1.1. Problems with using profit maximization as the goal of the firm? How does the goal of maximization of shareholder wealth deal with those problems? (a) Microeconomists usually assign profit maximization as a theoretical goal, which ignores real life problems such as uncertainty and timing. Microeconomic theory doesn’t address risk in a way that measures the risk of one project over another, but risk is immediately tied to returns; thus, this theoretical approach can lead to...