Theory of The Firm
In the context of the theory of the firm, a risk neutral firm facing risk about the market price of its product, and caring only about profit, would maximize the expected value of its profit (with respect to its choices of labor input usage, output produced, etc.). But a risk averse firm in the same environment would typically take a more cautious approach.
Read more about this topic: Risk Neutral
Famous quotes containing the words theory of, theory and/or firm:
“Hygiene is the corruption of medicine by morality. It is impossible to find a hygienest who does not debase his theory of the healthful with a theory of the virtuous.... The true aim of medicine is not to make men virtuous; it is to safeguard and rescue them from the consequences of their vices.”
—H.L. (Henry Lewis)
“The human species, according to the best theory I can form of it, is composed of two distinct races, the men who borrow and the men who lend.”
—Charles Lamb (1775–1834)
“I have come to have the firm conviction that vanity is the basis of everything, and finally that what one calls conscience is only inner vanity.”
—Gustave Flaubert (1821–1880)