Why have some economists criticised the traditional profit-maximising theory of the firm?
Correct answer B. Both because firms do not know how to maximise profits and because firms have other aims
Topic / 20 questions
Alternative Theories Of The Firm MCQs
Alternative Theories Of The Firm MCQs examine why firms may not simply maximise profit, covering sales revenue maximisation, behavioural theories, stakeholders, mergers and the separation of ownership from control. They help CSS, PMS and UGC NET economics candidates and lecturer test applicants. Every question has an instant answer, so you can check each concept quickly.
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Why might public limited companies not maximise their profits?
Correct answer D. Shareholders have little control over managers
In which type of business does the separation of ownership and control tend to occur?
Correct answer D. Public limited companies
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Why may a firm be unable to maximise profits?
Correct answer A. Both not knowing its MC and MR and having too little information
According to Williamson, which of these might managers not try to achieve?
Correct answer B. Maximum profits
What do economists usually call the problem caused by the separation of ownership and control?
Correct answer A. Principal-agent problem
Where does a sales-maximising firm produce?
Correct answer A. Sales revenue is maximized
Growth maximisation is the same as what?
Correct answer A. Maximising the growth of sales revenue
What type of merger is a merger between a clothing firm and a software producer?
Correct answer A. Conglomerate
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Fear of takeovers will lead firms to maximise what?
Correct answer A. Profits
Behavioural theories of the firm focus on what kind of interests, and of whom?
Correct answer C. Conflicting; different parts of the firm
Galbraith’s idea that firms are run by a technostructure supports which theories?
Correct answer A. Williamson’s
Firms that engage in satisficing behaviour are likely to be what?
Correct answer C. Like other firms in their industry
What does it mean when firms satisfice?
Correct answer A. Objectives such as profit are not maximized
In which type of market is sales maximisation most likely?
Correct answer A. Oligopolistic
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What type of merger is a merger between a fibre producer and a clothing firm?
Correct answer B. Vertical
What type of merger is a merger between two clothing firms?
Correct answer C. Horizontal
Which of the following are not stakeholders in a company?
Correct answer D. None of the above
Which of the following is not a usual reason for a merger?
Correct answer C. To increase competition
Why do firms build organisational slack into their operations?
Correct answer D. Both to cope with unforeseen changes and to minimise conflict
About Alternative Theories Of The Firm MCQs
Traditional theory assumes profit maximisation, but this topic explores other objectives. Questions ask where a sales maximising firm produces, why managers' interests may differ from owners', and what economists call the principal agent problem caused by the divorce of ownership and control in large public companies. Behavioural theories that focus on the interests of different groups within the firm also appear. You will classify mergers as horizontal, vertical or conglomerate, for example two clothing firms joining versus a fibre producer joining a clothing firm, and identify who counts as a stakeholder.
Exams that include Alternative Theories Of The Firm MCQs
Pakistan
- CSS
- PMS
- Lecturer tests
India
- UGC NET
- State PSC exams
Bangladesh
- BCS
- Bangladesh Bank recruitment
Frequently asked questions
What is the principal agent problem?
The principal agent problem arises when owners, the principals, hire managers, the agents, whose goals differ from theirs. Managers may pursue salary, prestige or firm size instead of maximum profit. It is common where ownership and control are separated, as in large public companies.
What is the difference between horizontal and vertical mergers?
A horizontal merger joins firms at the same stage of production in the same industry, such as two clothing makers. A vertical merger joins firms at different stages of the same supply chain, such as a fibre producer and a clothing firm.
How many Alternative Theories Of The Firm MCQs are on MCQs360?
MCQs360 has 20 Alternative Theories Of The Firm MCQs, each with an instant answer and free to practise without signing up. Compare each alternative objective with profit maximisation as you revise, since many options test that contrast.
Last reviewed October 2026