Question

Select the correct economic criterion (maximize profit, minimize cost, maximize benefit) for each of the following scenarios:
A services contractor received a fixed price contract to install and maintain IT equipment for the city of San Diego. What is the economic criteria for the services contractor?
A couple has budgeted $15,000 for their wedding. What is the economic criterion for the couple planning their wedding?
A sandwich shop has found that decreasing the price of a sandwich increases sales but at a decreasing rate as price drops. What is the economic criteria for the sandwich shop?

Why is step 9 of the decision making process, audit the results, important? Why do you think firms often ignore this step?

Answer 1

Answer)

1. In this case,price to be received is already decided,s/he will try to minimize cost so that total benefit of contractor increases,so here economic criteria is minimizing cost.
2. In this case,couple has already budgeted,also they are not in business of making money,however they want to take as much benefit as possible,so here the economic criteria is to maximize benefit
3. In this case sandwich shop has not yet decided on the cost,it needs to look at how much will be overall revenue and how much cost will there be,then this cost will be reduced from revenue which means that what sandwich shop is looking for is to maximize profit,so here economic criteria is to maximize profit.

Auditing the results is important part of decision making process because it is one of the most crucial input for taking the future course of action,if there is not a fair result,there will always be confusion regarding effectiveness of previous methods and future actions no matter how good may not turn out to be effective as we would n't have fair results.

Companies ignore this as they always fear that audited results will decrease profits and take the sheen away from good results,moreover their are different methodologies and companies do not want different methods to present a different picture,hence the hesitation.

Answer is complete.Thank you!