Objective Of Firms

Question 1

When does profit maximization occur

Answer 1

At the level of output where profit cannot be increased any further.

Question 2

A firm can increase its profit

Answer 2

Whenever the cost of producing an additional unit of a good is less than the revenue attained from selling it (MR>MC)

Question 3

When MC<MR

Answer 3

The firm will increase its profits if they increase their output

Question 4

If MC of production is greater than MR (MC>MR) from the sale of a g/s

Answer 4

The firm will incur a loss therefore when MC>MR, firms are encouraged to cut production or decrease output in order to maximize profits
The firm would produce at a level of output and sell that level of output at the point where MC=MR where the firms achieve profit maximization*

Question 5

when MR>MC

Answer 5

firms should produce/sell more output

Question 6

When MR=MC

Answer 6

Profit maximization occurs

Question 7

When MC<MR

Answer 7

firms should decrease output

Question 8

Survival

Answer 8

A firm may set prices low to keep customers from switching to other new products. This will enable the firm to stay in business but its profit might come down

Question 9

Sales Maximization/Growth in Market share

Answer 9

Some firms may cut prices to encourage more consumers to but its products. As the firm gets more customers, market share increases but the lower prices may result in lower profits

Question 9

Sales Maximization/Growth in Market share

Answer 9

Some firms may cut prices to encourage more consumers to but its products. As the firm gets more customers, market share increases but the lower prices may result in lower profits