The Fatal Equilibrium Essay

This essay has a total of 863 words and 4 pages.

The Fatal Equilibrium

Principle of Economics 2304

When faced with competition, firms must seek profit maximization in order to grow and
survive against the threat of new competitors. As explained by the natural selection
theory presented by some economists, firms that do not seek to maximize profits may be
forced to close their doors when competitors offer higher-quality products to consumers
(Ruffin & Gregory 135). Further, in Adam Smith’s view of capitalism, firms must pursue
their self-interest in the form of profits and these profits motivate firms to pursue
society’s interest while striving for their goals (Ruffin & Gregory 135). Profit
maximization or rewards motivate people to commit certain acts or behave in a particular
manner in order to reap rewards. Whether that action provides higher profits, increases
revenues or market share, or minimizes losses, people will act in their own self-interest
and take the necessary measures that give them an advantage over their competitor.

The term profit maximization explains “the search by firms for the product quality,
output, and price that give the firm the highest possible profits” (Ruffin & Gregory 135).
In the case of The Fatal Equilibrium, a number of individuals act as firms that seek to
maximize their profits by presenting their product (themselves) in a manner that gives
them an advantage over their competitors. The firms in this story sought to limit their
exposure to the ups and downs of the economy (or life) by taking actions that minimized
the risks and increased their profit margins. Therefore, we shall demonstrate how three
individuals, Dennis Gossen, Dorothy Nolan, and Denton Clegg sought to maximize their
profits through their actions.

First, let’s present the firm of Dennis Gossen a brilliant young man with unlimited
potential. Dennis was an exceptional economist with tremendous skills at collecting
numbers and interpreting them through the economic theories (Jevons 5). Though part of the
junior faculty, Dennis would be reviewed for a tenured teaching position at Harvard in the
upcoming promotion and tenure votes. Being part of Harvard’s faculty was a prestigious and
dubious honor—one he did not wish to relinquish under any circumstances (Jevons 7).
Therefore, when Dennis accidentally discovered that Harvard’s Dean, Denton Clegg, had
fabricated false research information for his book, Dennis used that information to
maximize his profits and gain the promotion. Since Dennis’ future promotion was uncertain,
he decided to minimize the risk of missing the promotion by blackmailing Dean Clegg and
ensuring that his firm would beat out the competitors. It was simply a question of supply
and demand. Numerous candidates vied for the limited number of tenured slots available and
Dennis decided to take the necessary measures to improve his utility among the candidates
(Jevons 81). However, Dennis made a fatal error in underestimating his very own assumption
that “people had only one goal in mind in all of their doings . . . a single-minded
pursuit of happiness” (Jevons 20).

Another example of a firm seeking profit maximization is Dorothy Nolan, the assistant
district attorney for Middlesex County. Dorothy had been the appointed district attorney
Continues for 2 more pages >>




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