What is an explaination of baumols sales maximization theory. Economic theories analyze competition among nonprofits for charitable donations from. Mc mr and the mc curve cuts the mr curve from below maximum profits refer to pure profits which are a surplus above the average cost of production. Baumols work helped economists as well as managers make sense. This approach is taken to satisfy the need for a simple objective for the firm. Michelsen institute cmi is an independent, nonprofit research. Profit maximization is a multiline income statement action that attempts to both.
Sales maximization theory is based on the work of american economist william jack baumol. Finally and more recently, we also have a knowledgebased theory of the firm 16, 17, 20, and a resourcebased theory 9, 10. One is to say that profit maximization is a fundamental principle of the theory, from which other principles are derived. More recently, the revenuemaximization dominance hypothesis has been reproposed by uekusacaves 34. Profit maximization is the process companies use to determine the optimal level of sales to achieve the highest profit. Pdf an assessment of the traditional theory of firm based. Profit maximization is the most important assumption used by economists to formulate various economic theories, such as price and production theories. According to conventional economists, profit maximization is the only objective of organizations. What is an explaination of baumols sales maximization. The theories based on the objective of profit maximization are derived from the. This quiz and corresponding worksheet will help you gauge your knowledge of the profit maximization theory ways to identify what can. This is not the same thing as profit maximization for. The economic theories of nonprofit organization appear ing in the literature can conveniently, if somewhat artifically, be divided into two types.
Top 3 theories of firm with diagram economics discussion. Economic theory normally uses the profit maximization assumption in studying the firm just as it uses the utility maximization assumption for the individual consumer. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. Profit maximization theory all of the above if one obeys the law, one is not necessarily acting ethically because ethical standards of conduct and legal standards of conduct are identical. Economic theories of the nonprofit sector yale law school. Pdf the transaction cost theory of the nonprofit firm.
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