Profit VS. Profit Maximization

We have already said that accounting profit is equal to total revenue minus total fixed cost and total variable cost. Economic profit is equal to accounting profit minus opportunity cost. We also know that profit, whether accounting profit or economic profit, is an event or happening that occurs when people engage in those kinds of human activities that generate revenues and produce goods and services.

Profit maximization is a different kind of animal. Most men and women in business probably think of it as maximizing their bottom line or accounting profit. Essentially, this perception is an accounting perspective. It is not an economic perspective. And it is not the meaning of profit maximization.

There are those who believe that profit maximization implies that companies can and will do anything to make the most profit they can, regardless of the means. They accuse business of raping the land, polluting the environment, destroying our institutions, and so on. This perspective on profit maximization is usually advanced by those who have never run a business.