According to the theory of the firm, the management's ultimate objective is to:
A) maximize short-term profit, even if this sacrifices long-term profit.
B) maximize the value of the firm.
C) increase production to the highest possible level.
D) increase the market share of the firm.
E) diversify into as many product lines as the firm can.

Question

Quizplus · Accepted Answer

According to the theory of the firm, the ultimate objective of management is to maximize the value of the firm, which can be achieved by making decisions that increase the firm's profits over the long-term. This approach is more sustainable and beneficial to stakeholders compared to sacrificing long-term profit for short-term gains or solely focusing on increasing production or market share. Diversification into multiple product lines may or may not be a part of the firm's strategy, depending on various factors such as market conditions and the firm's capabilities.

According to the Theory of the Firm, the Management's Ultimate