Profit Maximization as the Goal of the Firm Is Not

question 17

Multiple Choice

Profit maximization as the goal of the firm is not ideal because ________.

• A) profits are only accounting measures
• B) cash flows are more representative of financial strength
• C) profit maximization does not consider risk
• D) profits today are less desirable than profits earned in future years

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Definitions:

Bounded Rationality

A concept that decision-makers are limited in their decision-making capabilities by the information they have, the cognitive limitations of their minds, and the finite amount of time they have to make decisions.

Cognitive Limitations

Cognitive limitations are the boundaries of human brain’s capacity to learn, remember, and make rational decisions.

Ambiguous Problems

Challenges or issues lacking clarity and that are open to multiple interpretations or solutions.

Ethical Soundness

The degree to which actions or policies are morally upright and adhere to accepted ethical standards.