Explain Why the Goal of a Firm Is Not to Maximize

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The Answer is Although revenue is important, the goal of firms is to maximize profit, which is equal to total revenue minus total cost. Selling more units typically involves increasing the cost of doing business. It is foolish to sell one more item at a lower price than it cost to make the item. Revenue might increase, but at the end of the day, the firm is spending more money than it will receive. Although there are some cases where revenue maximization is consistent with profit maximization, in most cases firms incur extra costs, and thus profit maximization is not the same as revenue maximization.

Explain Why the Goal of a Firm Is Not to Maximize

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