Firms and their objectives: Profit maximisation

Firm is a unit of decision making, aims of which are:
- profit maximisation
- avoidance of risk
- growth in the long-term

It could be a sole trader or a huge company like Microsoft. In the theory of firms it's an a priori that they are searching for the highest levels of profits possible. Profit maximasation is achieved when MC=MR. More profit can be made by increasing the output if MR>MC. IF MC is greater than MR, that means that the firm's profit is below its maximum.

Though firms cannot actually know the exact profit maximisation point, becaus they are unlikely to know their MR or MC.

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