Suppose the utility function for a firm manager is U = $\pi$ + bQ, where Q is output, $\pi$ is profit, and b is a positive constant.How would the firm's output compare with what it would be if the manager's objective was to maximize profit?
A)It would be greater than the profit-maximizing output.
B)It would be less than the profit-maximizing output.
C)It would be the same as the profit-maximizing output.
D)None of the statements associated with this question are correct.

Question

Quizplus · Accepted Answer

The utility function includes both profit and output, with a positive weight on output (bQ). This implies the manager values output in addition to profit, leading to a higher output level than if they were solely maximizing profit.

Suppose the Utility Function for a Firm Manager Is U π\piπ

Suppose the Utility Function for a Firm Manager Is U $\pi$