Advantages of Profit-Maximization Hypothesis: Prediction: Proper Explanation of Business Behaviour: Knowledge of Business Firms: Simple Working: More Realistic: Ambiguity in the Concept of Profit: Multiplicity of Interests in a Joint Stock Company: No Compulsion of Competition for a Monopolist.

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While a cost-benefit analysis can help a company estimate the net benefit of a project, benefits are typically more difficult to predict than costs. For example, a company might know the exact cost of the materials needed to produce a new product, but it is impossible to know exactly how many units a new product will sell when it goes on the market.

Estimating costs and benefits can, however, give a business an idea of the lowest amount of revenue a new project needs to produce to break even and help set revenue goals to make projects profitable. A cost-benefit analysis can be a useful tool for decision-making, but the accuracy of a cost-benefit analysis is limited by the thoroughness of recognizing likely costs and benefits.

If a business fails to recognize potential costs and benefits, it can cause poor results that lead to sub-optimal decisions. For example, if a factory fails to account for the environmental impact of its operations as a cost, it could lead it toward projects that create more pollution, which might be bad for society and hurt the company's reputation.

Profit maximization.1.Profit Maximization.Introduction. Profit is the making of gain in business activity forthe benefit of the owners of the business. Generally Profits are the primary measure of thesuccess of any business. Profit maximization is the short run or long runprocess by which a firm determines the price andoutput level that returns the greatest profit. Profit maximization refers to the sales levelwhere profits are highest.

You might assume thatthe higher the sales level, the higher the profits -but that is not always true!.DefinitionA process that companies undergo to determinethe best output and price levels in order to maximizeits return.

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