Question

In neoclassical economics, the objective of the firm is best described as: a-Profit maximization b-Utility maximization c-Cost maximization d-Risk minimization

Answer 1

The objective of the firm in neoclassical economics is best described as profit maximization. This perspective asserts that firms aim to allocate resources efficiently to maximize the difference between total revenue and total cost.Thus,the correct option isa-Profit maximization

Step-by-step explanation:

Neoclassical economics posits that the primary objective of a firm is profit maximization. This perspective argues that firms aim to allocate resources efficiently to maximize their profits. Profit, in economic terms, is the difference between total revenue (TR) and total cost (TC).

Mathematically, profit
`(\( \pi \))` can be expressed as
`\( \pi = TR - TC \)`. Firms seek to produce at a level where marginal cost (MC) equals marginal revenue (MR) to maximize profit. This equilibrium condition is represented as ( MC = MR ). Therefore, profit maximization involves choosing the output level where the additional cost of production equals the additional revenue generated.

In the neoclassical framework, alternative objectives such as utility maximization or cost minimization are considered suboptimal. Utility maximization is more relevant to the realm of consumer choice, while cost minimization may not align with the firm's goal of generating maximum profits.

The neoclassical perspective emphasizes the profit motive as a key driver of economic behavior, reflecting the fundamental assumption that firms operate to maximize their financial gains in a competitive market. Thus, within the neoclassical paradigm, the firm's primary objective is best described as profit maximization.

Thherefore,the correct option isa-Profit maximization