There are problems with using the "profit maximization" criterion. Which of the following is (are) correct?
I. Profit maximization has an ambiguous definition of "maximizing profits."
II. Profit maximization fails to consider the risks associated with alternative decisions.
A) Only statement I is correct
B) Only statement II is correct
C) Both statements I and II are correct
D) Neither statement I nor II is correct

Question

There are problems with using the "profit maximization" criterion. Which of the following is (are) correct? 
I. Profit maximization has an ambiguous definition of "maximizing profits."
II. Profit maximization fails to consider the risks associated with alternative decisions.
A) Only statement I is correct
B) Only statement II is correct
C) Both statements I and II are correct
D) Neither statement I nor II is correct

Quizplus · Accepted Answer

Statement I is correct because "maximizing profits" can have different interpretations such as short-term vs. long-term profits, profits before or after taxes, accounting profits vs. economic profits. Statement II is also correct because profit maximization ignores the potential risks and uncertainties associated with alternative decisions. While profit is an important goal, it is crucial to also consider other factors such as sustainability, social responsibility, and long-term growth.

There Are Problems with Using the "Profit Maximization" Criterion