The assumption of profit maximization is frequently used in microeconomics. Howe

Question

The assumption of profit maximization is frequently used in microeconomics. However, do firms always seek to maximize profit? Firms A. maximize profit because they are more concerned about longer-run profit than short-run profit. B. do not always maximize profit because firms may instead engage in altruistic behavior that reduces profit. ° C. do not always maximize profit because many firms survive in competitive industries by instead focusing on revenue maximization. O D. do not always maximize profit because managers may instead be more concerned with payment of dividends. 0 E. maximize profit because they have perfect information

Explanation / Answer

Correct option is (C).

In a highly competitive business environment, retaining market share in terms of revenues is of highest importance to many firms, who therefore go for revenue maximization instead of profit maximization.

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