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In: Economics

One of the main Limitations of the Theory of the Firm , Is that “ Seeking...

One of the main Limitations of the Theory of the Firm , Is that “ Seeking satisfactory rather than optimal results”….explain this limitation , illustrate your answers with a real case .

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Expert Solution

Ans: The main limitations of the theory of the firm that seeking satisfactory rather than optimal results this limitation means instead of going for the best result after utilising optimum utilisation of the resources it is just to consider a satisfactory result from a particular project or a process.

Optimal reserves mean the best results within the available resources.

This limitation of the theory of the firm can relate with the real business model of Elon Musk space X mission which is satisfactory but not based on the optimal result.

Because it is a program that is a mental satisfaction for Elon Musk but it is not practically implemented in a situation of the real theory of acceptance from the side of people.

So basically in the organisation, it is very important to work according to the optimal utilisation of resources instead of doing work just for satisfaction, sometimes it will reduce the revenue of the firm.


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