2 - the objective of firms Flashcards
when total income or revenue is greater than the total costs
profits
what the firm receives for the sale of it’s product
price x number sold
total revenue
total revenue ÷ number sold
average revenue
the addition to total revenue from the production of an extra product
marginal revenue
total revenue minus total costs
total profit
the amount required to keep a factor employed in its present activity in the long run
normal profit
where a firm chooses a level of output where marginal revenue equals marginal costs
profit maximisation
a return above normal profit- a surplus payment
supernormal profit
profit below normal which should lead to the firms leaving the industry
Sub-normal profit
individual who organises the factors of production in order to make a profit
entrepreneur
a firm owned by a group of shareholders whose shares can be traded on the London stock exchange
public limited company (plc)
a private enterprise firm incorporated with the register of companies
corporation
an individual elected by a company’s shareholders to set corporate policies
director
non-monetary benefits like an expensive car provided by the firm
perks
financial return from the ownership of shares in a firm
dividends
the right to buy or sell stock at an agreed price
share options
shareholders that will clamour for greater dividends and may mobilise other shareholders to oppose the management
activist shareholders
a bid to buy shares in an attempt to gain control of the firm which is opposed by the firms directors who fear job loss
hostile bid
the firm is producing satisfactory but not maximum profit
satisficing
firms, organisations or individuals with an interest in the firm
stakeholders
percentage of the total market held by the company
market share
when a firm has the ability to exert significant influence over the quantity of goods traded or the price at which they are sold
market power
where all costs and benefits are considered before a decision is taken
rational choice theory
where firms may be taken over by other firms if they appear to be making lower profits than their assets would suggest
capital market discipline
