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Goals of a Firm: profit maximization and what other goals?

Understanding Various Goals of a Firm

Introduction: Some economists are of the opinion that making a profit must not be the sole purpose of a firm's operations. There are other goals that can be considered equally important.

Task: Explain the above statement in light of the various theories of a firm as developed by economists.

You must develop your answer based on the following points:

? Can modern corporations consider profit maximization to be their only goal?
? Can there be other goals also? If so what are they?
? What makes a firm chose a particular goal?
? Do changing market conditions affect these goals?

Thank you.

Solution Preview

Can modern corporations consider profit maximization to be their only goal?

No, profits are not the only goal in recent times although it should be pointed out that without profits, other non-monetary goals could not be accomplished. Profits should never be under-rated. To point back to the days of a more singular goal (profits), Standard Oil was an excellent good example. Rockefeller was ruthless and very good at what he did: making money. The monopoly was broken by a Federal Court in 1911 and Rockefeller personally spent many years giving away some of that money he earned.

Can there be other goals also? If so what are they?

In the current ...

Solution Summary

The 440 word solution agrees with the profit motivation, but then lists six other goals that have been adopted by companies (or forced on them). For each goal, the solution then lists a reason why a company might choose that particular goal.

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