Evaluate the view that all firms aim to profit maximise

Firms can maximise profits by producing at where MR=MC. Firms who are for-profit organisations, such as Apple, will look to profit maximise, in order to maximise dividends for owners and increase retained profits so they can invest in the future. A firm will profit maximise by producing at where MC=MR, producing an output of Qm and setting a price of Pm. At this level of output, the firm maximises profits and makes supernormal profits of the PmMPc rectangle. This supernormal profits allows the firm to be dynamically efficient in the long run, as they can use the profits to invest in research and development, such as buying more efficient machines to put all the parts together, or training programs for workers, to improve customer service. This allows them to gain economies of scale in the long run, as the more productive machines allow them to produce more units of output with the given number of factor inputs, increasing productivity and thus lowering long run average costs from, C to C1, as output increases from Q to Q2. However, firms who profit maximise aren’t productively efficient, as they don't produce at the lowest point of the AC curve, (point C). This means that Apple could have higher costs in the short run and thus be unable to competitive with the likes of Samsung, who might have lower average costs. So instead, Apple may choose to sales maximise, as if they do they will be productively efficient as they will produce at where AR=AC, and thus produce at the lowest point of the AC curve. This allows them to better compete with international competitors, like Samsung. Furthermore, by sales maximising, Apple are able to be allocatively efficient, as they also produce at where AR=MC, and thus reduce the deadweight loss that was present when they were profit maximising. By selling a lower price, Apple will less likely be scrutinised by the competition and markets authority (CMA), as they wont be seen as being exploitative of consumer welfare with higher prices. This could reduce their costs in the long run, as they will receive less fines, meaning that Apple will have an incentive to sales maximise rather than profit maximise, to avoid the possibility of getting fined and incurring larger costs in the long run.Another reason why firms will want to profit maximise is to increase their market power. A firm which profit maximises will have high supernormal profits, which gives them the ability to predatory price in the future as they will have more retained profits available to sustain themselves at a lower price. A firm can predatory price by lowering price to a point below their AVC, to force competitors to make a loss and thus leave the market, especially newer firms who have yet to exploit economies of scale and thus still have high costs relative to the incumbent firms. If the firm who engages in predatory pricing profit maximise, then they will have high retained profits and thus be able to sustained the losses caused when the predatory price. This therefore allows them to remove competition and gain larger market power and thus be able to increase prices back up in the long run and make more supernormal profits, by setting a higher price. (draw cost revenue diagram with price = AVC, and analyse by saying the firm will have to set at a point below this point).However, the firm may choose to go for different objectives, such as profit satisficing, because of the principal agent problem. This is when there is a separation of ownership and control with in the firm, where the owners of the firm (shareholders) have different objectives to directors and managers, who are the ones that run the day to day aspects of the business. Shareholders will want to the firm to maximise profits as this means that they will receive greater dividends as a result. However, directors and managers may prefer to maximise other objectives such as work-life balance, by limiting the amount of hours worked and improving working conditions to maximise worker satisfaction, and thus the managers have much less incentive to maximise profits, and might therefore create a minimum level of profit to keep the shareholders happy, but then focus on different objective. So the firm, controlled by the directors and managers may choose to profit satisfice rather than profit maximise.