The Open Management Journal

2009, 2 : 11-16
Published online 2009 August 27. DOI: 10.2174/1874948800902010011
Publisher ID: TOMANAJ-2-11

An Increase in Per Unit Cost: The Response from a Sales Maximizer and a Profit Maximizer

Lydia Gan , Shuntian Yao and Ke li
Department of Economics,Finance and decision Science, School of Business, University of North Carolina at Pambroke, Pambroke, NC 28372, USA

ABSTRACT

This paper investigates the decision making of firms with two different objectives – profit maximization and sales maximization, and compares their responses when encountering a higher per unit production cost or if per unit tax is imposed. The discussion in this paper is a follow up of Li and Yao [1], except in this case, a more comprehensive literature review is provided, and a very restricted result previously proposed has been substantially expanded to a few more general propositions.

Keywords:

Profit maximization, per unit cost increase, sales maximaization, JEL classification: D21, M21.