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A Geometric Treatment of Averch-Johnson's Behavior of the Firm Model: Comment.
- Source :
- American Economic Review; Mar1972, Vol. 62 Issue 1, p140-141, 2p
- Publication Year :
- 1972
-
Abstract
- This article comments on E. E. Zajac's study on the relationship between the rate of return to stockholders and the returns earned from equity capital. The article argues that Zajac has made an error in claiming that maximizing the reward owners leads to an indeterminate solution. The article presents the equation identical to equation derived by Zajac for profit maximization because the return to stockholders must be computed with respect to the market value of the equity rather than the book value and must include any capital gains which may accrue. The article implies that Zajac conclusion on the firm is indifferent among all input combinations.
Details
- Language :
- English
- ISSN :
- 00028282
- Volume :
- 62
- Issue :
- 1
- Database :
- Complementary Index
- Journal :
- American Economic Review
- Publication Type :
- Academic Journal
- Accession number :
- 4502335