The businessmen can ignore the principle of maximisation of profits only at their peril. As Prof. Samuelson observes, “If a firm is absolutely reckless in calculating costs and revenues. then the Darwinian Law of the Survival of the fittest will probably eliminate it from the economic scene. Therefore those firms which do manage to survive can nut be completely oblivious to the maximisation of profits,” In order to maximise profits. a businessman tries 10 equate MR with Me but he needs full information on marginal costs and elasticity of demand which is lacking, In order to maximise profits he ‘marks up’ price as a certain percentage of the average cost.
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