profit maximization

(redirected from Profit maximisation)
Profit maximizationclick for a larger image
Fig. 161 Profit maximization.

profit maximization

the objective of the firm in the traditional THEORY OF THE FIRM and the THEORY OF MARKETS. Firms seek to establish the price-output combination that yields the maximum amount of profit. The achievement of profit maximization can be depicted in two ways:
  1. firstly, where TOTAL REVENUE (TR) exceeds TOTAL COST (TC) by the greatest amount. In Fig. 161 this occurs at the output level where the slope of the two curves is identical and tangents to each curve are consequently parallel, as at Qe. At any output level below Qe, the relevant tangents would be diverging - the TR and TC curves would still be moving farther apart and profits would still be rising. At any output level beyond Qe, on the other hand, the relevant tangents would be converging and the profit surplus of TR over TC would be falling. Thus, Qe is the optimum point, for here the distance between the total revenue and total cost curves is maximized (equal to AB). The difference between the two curves shows up in the total profit curve, which becomes positive at output OQ1, reaches a maximum at output OQe (where profit CD = AB) and becomes negative beyond output OQ2 ;
  2. secondly, profit maximization can be shown to occur where MARGINAL REVENUE (MR) equals MARGINAL COST (MC) - at output OQe in the figure. At all output rates above OQe, additional units add more to cost than revenue, so total profits are reduced. At all output rates less than OQe, additional units add more to revenue than cost, thereby expanding total profits. Only where MR = MC are profits maximized. See FIRM OBJECTIVES.
References in periodicals archive ?
Entities like the All Pakistan Textile Mills Association and the Pakistan Readymade Garments Manufacturers and Exporters Association must think beyond profit maximisation and pay more heed to the situation of garment workers.
A businessman's incentive is 'profit maximisation'.
Global capitalism, fuelled by greed for profit maximisation, is posing challenges to the Earth in unimaginable ways.
'The aim of all businesses is profit maximisation, therefore ensure that all profits are made in a legal and ethical manner,' he said.
Although it is not the report's role to advise waqf investors on asset allocation, it observes they are generally not after profit maximisation but rather the fulfilment of certain social objectives.
Minister Scicluna stated that rather than being driven by purely commercial considerations and profit maximisation, the Malta Development Bank would be primarily committed to support socio-economic objectives in the public interest.
"Profit maximisation and short-term results have driven a lot of economic activity in the world, and we are in a difficult spot because of that," said Tirad Al Mahmoud, CEO of Abu Dhabi Islamic Bank.
Mr Phillips argued that to be more trusted, companies need to create "public value" as well as shareholder value, and focus on profit optimisation rather than profit maximisation. He cites banking, arguing that if a bank were to make radical changes including copying the John Lewis Partnership employee ownership model, ceasing extravagant bonuses, and levying a small charge to its retail banking customers rather than claiming to offer free banking', it would begin to earn genuine consumer trust, "and quickly address the challenge of being socially useless."
Alaris LCR Engine is developed with a focus on profit maximisation for every single call or SMS processed by the network, which is a primary objective for any carrier pursuing success in the modern telecom market driven by ever-growing competition and constantly decreasing rates.
Striving for maximum profit is what underpins the philosophy of the whole capitalist system and while I am by no means advocating a return to the type of state nationalisation of 1947/48, surely some element of public ownership of these valuable assets would enable the Government of the day to exercise some element of restraint on the apparently unfettered 'profit maximisation' that so many of the less well-off in our society are currently suffering from?
Striving for 'maximum profitisation' is what underpins the philosophy of the whole capitalist system and while I am by no means advocating a return to the type of state nationalisation of 1947/48, surely some element of public ownership of these valuable assets would enable the Government of the day to exercise some element of restraint on the apparently unfettered 'profit maximisation' that so many of the less well-off in our society are currently suffering from?
These mandates were focused purely in UAE blue chips where profit maximisation was achieved by a blend of balanced asset allocation and active trading while maintaining adequate exposure to the markets.