3.2.1 business objectives

Question 1

rational business objective + why

Answer 1

profit maximisations
increase underlying share price which increase wealth of shareholder

Question 2

profit maximisation rule

Answer 2

marginal cost (MC) = marginal revenue (MR)
no additional profit can be extracted
by producing another unit of output

Question 3

when Marginal cost (MC) less than Marginal revenue then

Answer 3

additional profit can be extracted by producing another unit of output

Question 4

when Marginal cost (MC) greater than Marginal revenue then

Answer 4

it’s gone beyond the profit maximization level of output ,, each additional unit produced there is marginal loss on each unit

Question 5

why may a firm struggle and find it difficult to calculate the profit maximization level of output

Answer 5

-in the short term marginal costs can change regularly and regular price changes can be disruptive to customer
-they might not know where profit maximization level of output

Question 6

firms may be forced to change prices by

Answer 6

competition commission

Question 7

firms objective

Answer 7

proft maximisation
revenue maximisation
sales maximization
satisficing

Question 8

some firms objective of revenue maximization and why

Answer 8

because principal agent problem
as sales managers receive