Evaluate the Argument That Managers Controlling Large Companies Might Follow Policies Which Do Not Necessarily Maximize the Profits of the Owners.

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There are 2 types of people controlling large companies: managers are responsible for running the company and they receive a salary for doing it; the owners or shareholders are the ones who invest into a firm and aim to maximize their profit. Traditional economic view of profit maximization is the short or long run process by which a firm determines the price and output level which as a result gives the largest profit. Therefore there are 2 types of profit: normal profit which is the level of profit which will keep the owner pleased and super normal profit which will be extra profit to normal one. That is why in most of cases managers are operating in order to achieve normal profit and keep the owners happy. In short run profit maximization will increase however in long run it is harder to increase companies profit because they will need perfect information in order to prevent the risk of the market. According to reality in most of times big companies work for society, to get a brand image and name lowering prices, use child labor and pesticides in order to create lower cost and therefore increase their profit. Sometimes companies make polices in order to get subsides as low carbon emission. As a result more consumers are demanding these products. In the short run firms may not increase their profits because the cuts in prices but if they achieve this in long run they may experience maxim profits. However the directors try to imply polices which do not always maximize the profits their objective is to satisfy the owners by getting some profit and growing the company in order to receive bigger market share to influence prices and quantity produced. I think that the managers should firstly try to grow the company and work for normal profit and maybe in long run obtain super normal profits. In short run they try to achieve lots of other objectives regardless profit

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