3.2 Business Objectives Flashcards
LS6
1
Q
When does revenue maximisation occur?
A
MR = 0
2
Q
Why might a business want to revenue maximise?
A
- EoS
- Predatory pricing (undercutting rivalry prices)
- Divorce of ownership and control, principal-agent problem (managerial utility maximisation)
3
Q
Where does sales maximisation occur?
A
AC = AR
* Where TR only just covers TC, breaks even
4
Q
Why might a business want to sale maximise?
A
- EoS
- Limit pricing to decentivise new firms entering the market
- Divorce of ownership and control, principal-agent problem (managerial utility maximisation)
- Flooding the market to raise brand awareness and develop brand loyalty
5
Q
What is satisficing?
A
- Firms trying to achieve satisfactory rather than optimal results
- Firm aims for a satisfactory level of profit or other objectives, rather than maximizing it, often due to constraints like limited information or conflicting objectives.
6
Q
Profit satisficing?
A
- Mixture of profit maximization and satisficing
- Firms seek to make enough profit to satisfy the demands of stakeholders
7
Q
Where does profit maximisation occur?
A
MR = MC
8
Q
Why might a business not want to profit maximise?
A
- Don’t know their MC = MR
- Greater scrutiny/investigation
- Key stakeholders harmed
9
Q
Incentives for firms to pursue corporate social responsibility?
A
- Socially irresponsible firms = negative image of firm held by workers and consumers = fall in firms’ revenues/profits and lowered worker productvitity
- Also = increased gov. regulation
10
Q
Examples of corporate social responsibility?
A
- Avoidance of polluting activities
- Support for human rights
- Art and athletics sponsorship
- Donations to charities
