IN the April I967 Journal of Industrial Economics, Marshall Hall tests the hypothesis that a firm maximizes sales revenue subject to its profit rate being above some critical level.' The hypothesis can be interpreted as saying that when profits are above (below) this minimal acceptable level, the firm will consciously attempt to increase (decrease) sales revenue. The test that Hall runs is elegant in its simplicity. If the effects on output decisions of all the factors other than profits are netted out, and if the change in profits is measured from a minimal profit constraint, then the hypothesis is verified by a positive relation between sales and the change in profits (cxij>to).2 The results of the test would appear to disprove the sales revenue maximization hypothesis. The axj, coefficients are not consistently positive. In fact, the coefficients alternate in sign as the lag increases. It is this author's contention that the test results are ambiguous for three reasons. Hall's procedure does not remove the effects on sales revenue of exogenous variables other than profits. It therefore
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