business objectives

Question 1

profit maximisation meaning

Answer 1

quantity set at MC=MR

Question 2

pro of profit maximisation

Answer 2

generates funds for reinvestment
retained profits is source of finance during a shock or difficult times
less susceptible to takeover
wages increase and dividend
lower cost as the firm can become more efficient

Question 3

con of profit maximisation

Answer 3

short term profits may prevent long term development
lack of knowledge on where MC=MR
other objectives
compromise quality of the good as using poorer raw materials
consumers have high prices
negative externalities due to increase production

Question 4

revenue maximisation meaning

Answer 4

quantity set at MR=0
each extra unit sold generates no extra revenue

Question 5

pro of revenue max

Answer 5

economies of scale
higher quantity produced - brand loyalty
higher quantity pushes away competitors
increase market share
better exposure to consumers and investors

Question 6

con of revenue max

Answer 6

principal agent problem
predatory pricing- when a firm undercuts other firms to decrease competition
sacrificing profits is not sustainable in the long run

Question 7

sales maximisation meaning

Answer 7

quantity set at AC = AR

Question 8

pro of sales max

Answer 8

economies of scale
size linked to security- larger firms are more likely to pass a shock
limit pricing to reduce new firms
flooding market means consumers are more aware of the product
high market share

Question 9

cost of sales max

Answer 9

other firms may copy a fall in price
not sustainable in long run
principal agent problem
lower efficiency due to lack of competition
diseconomies of scale

Question 10

corporate social responsibility meaning

Answer 10

giving away to society
e.g. arsenal paying for recycling in north london

Question 11

collective capitalism meaning

Answer 11

when the worker are the shareholders and the firm is divided up between many people