Essay - Business Economics Profit Maximization Theory the Primary Purpose of any...

Business Economics

Profit Maximization Theory

The primary purpose of any company consists in obtaining profit. Once a company is productive and successful, it will focus on maximizing its profit. Therefore, profit maximizati***** is the objective that ***** company's managers and their subordinates have to attain.

Within the community the company is active in, the necessary goods must be obtained through certain activities, which ********** lead to the problem regarding their cost. In nowadays global economy, producers use limited economic resources in order to produce goods by maximizing prof*****. The decision to produce economic goods, in terms of relatively limited *****, with alternative usage, engages two categories of efforts:

The first is determined ***** production factors involved in the economic activity

The second one is related to fac*****rs that must ***** left aside as a consequence of restrictions that come with the possibilities involved

***** resources necessary for producing certain material goods and services together with the losses that emerge in case ***** pass*****g ***** opportunity to ***** other goods constitute the producer's cost. Th***** cost ***** in the ***** cost and the opportunity *****. The production cost is consisted of all the economic resources engaged in ***** the goods. The opportunity cost represents the cost ***** the lost ***** *****, and it is considered to be a relative cost.

***** theories regard*****g cost have evolved during decades. For example, Adam Smith identifies the cost with the real price of the good. In his opinion, ***** real ***** of any good, the cost ***** the buyer literally pays, is the equivalent of the concern required for purchasing it. In o*****r words, this price is consisted of the rent, wage, and ********** that must ***** paid in ***** for ***** good to enter the market. Karl Marx considers the ***** ***** be part of the good's value, the ***** that ***** producer ***** pay in order to produce the good, measured by constant and variable expenses. J.B. Say ***** that cost is a reward for services ***** production factors, combined, substituted, and used in the production *****. The opportunity cost term was introduced in the economic literature by ***** von Wieser, as the profit expected from a ***** *****, with alternative usage.

Given the relationship between the evolution of certa***** ***** ***** production modification, the production ***** is cons*****ted of variable cost and fixed *****. The variable cost category includes those production expenses ***** change in the same direction as production does, on a short period of time. The variable cost *****: raw material expenses, energy expenses, salaries expenses, and others. The ***** cost category includes those production expenses that do not depend on the volume of ***** on short term, they remain ***** unchanged. ***** total production ***** is consisted of the variable cost and the fixed cost.

Given the nature ***** expenses, there are two cost *****: explicit ***** and implicit cost. The explicit cost ***** all the expenses made ***** the *****r for purchasing ***** production factors: raw *****s,