2.1 Business Objectives

Question 1

Reasons for different objectives?

Answer 1

1) Managerial objectives
2) Information gaps
3) Size of firms

Question 2

Where on the diagram is profit maximisation?

Answer 2

MR=MC

Question 3

Benefits from profit maximisation?

Answer 3

1) Shareholders benefit
2) Employees may gain pay
3) Higher investment

Question 4

Drawbacks from profit maximisation?

Answer 4

1) Higher prices
2) Incentive for new firm entrants
3) Negative externalities

Question 5

Where on the diagram is sales maximisation?

Answer 5

Where sales are highest without making a loss
AC=AR

Question 6

Benefits of sales maximisation?

Answer 6

1) Manager benefits
2) Increase market share
3) Deter competition

Question 7

Drawbacks of sales maximisation?

Answer 7

1) Only normal profits
2) Less investment
3) Possible anger to shareholders

Question 8

Where on the diagram is revenue maximisation?

Answer 8

MR=0

Question 9

Benefits of revenue maximisation?

Answer 9

1) Manager benefits
2) Deter competition

Question 10

Drawbacks of revenue maximisation?

Answer 10

1) Lower profits
2) Possible angered shareholders

Question 11

What is satisficing?

Answer 11

Where managers accept a minimum stakeholder requirement for a business objective but then pursue a different objective