Profit Maximization - An Actual or Theoretical Objective Essay

Profit maximation - An Actual or Theoretical Objective - render ExampleFor example, rice farmed and thrashed by the farmer is sold for a particular repute to companies. These companies in magic spell process the rice, separating quality grains and packing them with their label, thereby increasing the appreciate of rice. The transporters and stores extract their profit by integrate it in the cost of the rice. In the end, the consumer pays a multifold pecuniary worth for the rice along with comparable value for money. Some musical arrangements hightail it to get carried away with their profit-making motives, ending up reaping unjustly high profits. Such organizations tend to lose their loyal customers for two major reasons non being able to provide comparable value for money and with the entry of competition into their market. Profit Maximization is now a general trend, which had earlier been a typical phenomenon for monopolistic competition where the absence of competition e nables these organizations to charge unjustly high prices for their offerings. Hence it is state that free competition is the invisible hand for controlling market prices naturally (Smith). When companies are allowed to compete without regulative interventions like government policies etc, the resultant market provides both buyers and sellers with best opportunities in terms of exchanges. Buyers and sellers benefit alike from the competition. Profit Maximization Profit Maximization is a basic Economics concept, which implies extracting highest possible profits through and through production and sales processes. Profit is the difference between total revenue enhancement and the total cost. Total revenue implies the total amount an organization receives from business whereas the total cost means the total investment the organization makes to produce and sell the goods and services. At different exercise levels, the cost incurred and the revenue earned tend to be different (as shown in the diagram). From Sparknotes.com The above graph clearly shows varied positivity at different activity levels. However, the highest profitability is at the point marked profit maximization. At this point, the difference between be and revenue is the greatest. At all activity levels below and above this point, the profit is lower in par with this point. Profit Maximization can be devised through numerous methods. The aforesaid theory is the Total Cost-Total taxation methodology for determining the profits. Marginal Revenue-Marginal Cost method is also used to determine maximum profitability activity level. However, the base line for both methods is the same revenue minus cost equals profit. Theoretically, Profit Maximization is often explained as an unethical practice on behalf of business owners, focusing extensively on pecuniary gains and overlooking other factors. On this note, it is important to remark that profit maximization does not necessary implicate unethical pra ctices regarding pricing. However, it fails to take adequate business relationship of alternative desires of the businessmen, for power, leisure, social prestige, and similar non-monetary rewards (Koplin). Some critics do not agree that Profit Maximization is the underlying objective for business operations since it does not take into account other factors important in the eyes of the investors. Most businesses do not operate for profit reasons whole some businesses like certain blood banks and hospitals work for societal welfare that cannot be weighed in monetary terms. But some critics maintain the importance of Profit Maximizati