Management is responsible for making decisions within businesses and these decisions often involve risks and uncertainties. Models have been developed, all based on the business objective, to help identify the decision that must be made to achieve the desired outcome (Moschandreas, 2000). The neoclassical model states that the primary objective of the firm is profit maximization. However, economists believe that it is unrealistic to assume that the goal of businesses is to maximize profits in this modern economy, for reasons discussed later. The management school offers alternative models to replace the neoclassical model which assumes profit maximization. This essay will examine Baumol's revenue maximization model and Williamson's managerial utility model in more detail. Marris' managerial business model will also be examined because it helps us understand in more detail why shareholders may complain about their company growing too quickly. The Neoclassical Model The neoclassical model states that the primary objective of a business is profit maximization; output is set at a level where marginal revenue equals marginal cost, as shown in Figure 1. This model can be used to predict how a business will respond to changes in its environment. This assumes that the company produces a single, standardized product and assumes perfect certainty and knowledge of present and future costs and demand conditions. More importantly, it assumes that the business is owned and managed by a single individual or a few individuals, which means that there is no conflict of interest between the principle and the agent and that maximization profit is the only objective of the company (Petrochilos, 2009). The neoclassical model does not take into account over which period profits should be maximized. It therefore assumes that companies... middle of paper ...... are sacrificed for growth which may lead to a buyback or sale of their shares. Works cited Boukouras, A., and course notes. sl:snDavies, H. & Lam, P.-L., 2001. Managerial economics: analysis of business problems. sl:snHall, R. & Hitch, C., and Price Theory and Business Behavior. sl:Oxford University Press. Marris, R., 1963. A “managerial” business model. sl:snMoschandreas, M., 2000. Business Economics Second edition. sl:Thomson Learning.Petrochilos, G., 2009. Managerial Economics 4th edition. sl:Pearson.Reekie, WD & Crook, JN, 1995. Managerial Economics A European Text. sl:Prentice Hall.Townsend, H., 1995. Foundations of business economics: markets and prices. New York and London: Routledge. Lila J. Truett & Dale B. Truett (1992). Managerial Economics 4th Edition Problem Case Analysis. South West Publishing Company.