Figure 1: Firm’s Goals

Max

Profit

Com

plyw/

Gov’t

Reg.

SatisfyCustom

ers

Satis

fyIn

vestor

s

OPTIMAL LEVEL

MAXIMUM LEVEL

Objective: To balance/optimize each of the firm’s goals, relative to othergoals and constraints.

• Evaluating trade-offs are the critical skill that managerial economists haveto contribute – they see the “big picture”.

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