A Final Word on Business Objectives

In the example used in this chapter, we assumed the students’ goal in how to operate the ice cream business was to maximize their profit—more specifically, to maximize their economic profit. Is this an appropriate overall objective for most businesses?

Generally speaking, the answer is yes. If a business is not able to generate enough revenue to at least cover their economic costs, the business is losing in the net. In addition to the business owners having to cover the loss out of their wealth (or out of society’s largesse for a bankruptcy), there is an inefficiency from a societal perspective in that the resources used by the business could be more productive elsewhere.

The ice cream business analyzed here ...

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