Question

Economists normally assume that the goal of a firm is to earn

(i) profits as large as possible, even if it means reducing output.
(ii) profits as large as possible, even if it means incurring a higher total cost.
(iii) revenues as large as possible, even if it reduces profits.

Answer 1

(i) profits as large as possible, even if it means reducing output.

Step-by-step explanation:

Profit maximization is a premise of firm theory in microeconomics. This is done by minimizing costs and rationalizing the quantity against the market price. Thus, eventually a company can maximize its profits by decreasing the amount produced. It will all depend on the cost structure and the market price. For example, if a firm produces 50 ice creams with a profit of $ 100. Depending on the cost and price structure, this firm may maximize its profit by lowering the quantity of ice cream to 25 and making it 70. In this case, the cost of production decreased more than proportionally to the quantity sold, and profit was maximized.