3.2-business objectives Flashcards
How do you calculate profit?
Difference between Total Revenue and total costs
When does profit maximisation occur?
Where MC=MR
What does MC=MR mean?
Each extra unit produced gives no extra loss or no extra revenue
Why do firms choose to profit maximise?
-provides greater wages and dividends for entrepeneurs
-In the short run, interests of the owners and shareholders are most important so they aim to maximise their gain
When does revenue maximisation occur?
MR=0
What is sales maximisation?
When the firm aims to sell as much of their goods and services as possible without making a loss.
Where is sales maximisation on a profit diagram?
AC=AR
Diagram summarising each objective
-revenue maximisation
-profit maximisation
-sales maximisation
What is satisficing?
When a firm is earning just enough profits to keep shareholders happy.
