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Why is profit maximization by itself an inappropriate goal? |
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From a business standpoint, profit maximization is not always the primary goal. 1. A company may be seeking to gain market share by lowering its prices and squashing competition. 2. It may be seeking to use working capital that might otherwise be used for marketing or expansion to pay back debt thereby lowering its debt-to-income ratio. 3. it may also be trying to buy back its shares from the public or private market thus lowering potential profits, but increasing profit-per-share to remaining investors. This is what pushes up a company's stock price.
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Many would argue that seeking profit maximization IS an appropriate goal. However, there are instances where profit maximization strategies hurt overall public welfare. In the case of a monopoly, a business will overcharge consumers for goods or services. While the monopolist is only seeking to maximize his or her profit, public welfare is actually decreased and many argue that government regulation in this area is desirable.
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Maximize your income, minimize your outgo. Maximization of profit is not inappropriate. It is inappropriate to plunder, but this is not maximization of profit because it's plunder and then the so called "profit" becomes theft. It is inappropriate to try and convince people that it is inappropriate for a business to maximize their profits. Maximization of profits is the purpose of doing business.
First answer by ID0000000000. Last edit by Kkonzelman. Contributor trust: 9 [recommend contributor]. Question popularity: 138 [recommend question]
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