October 2020 (IAL) Section C, Question 10:
One key objective a business may pursue is profit maximization, which
should enable the firm to generate the greatest level of profits possible at
a given point in time. According to neo-classical theory, private firms are
assumed to prioritize the objective of profit maximization due to the
interests of shareholders and owners. For these stakeholders, maximizing
profits is crucial to maximize their returns on dividend and to enhance
their wealth through rising share prices. Consequently, private firms are
assumed to strive to operate at the point where marginal cost (MC) equals
One key objective a business may pursue is profit maximization, which
should enable the firm to generate the greatest level of profits possible at
a given point in time. According to neo-classical theory, private firms are
assumed to prioritize the objective of profit maximization due to the
interests of shareholders and owners. For these stakeholders, maximizing
profits is crucial to maximize their returns on dividend and to enhance
their wealth through rising share prices. Consequently, private firms are
assumed to strive to operate at the point where marginal cost (MC) equals
