3.2 - Profit Maximisation Flashcards
1
Q
When does profit maximisation occur?
A
MC=MR
2
Q
What else occurs during profit maximisation?
A
Loss minimisation
3
Q
What are the benefits of profit maximisation?
A
Shareholder dividends
Employees real wages
Capital Investment
Dynamic efficiency
Financial safety net
4
Q
What are the drawbacks of profit maximisation?
A
Higher prices
Entry incentive
Ethical losses
Maximisation method
5
Q
Impacts of higher prices?
A
Consumer real incomes
Purchasing power
Lost consumer surplus
6
Q
Entry incentive problems
A
Profit attracts entrants
Depends on contestability
May harm long run returns
7
Q
Maximisation method issues
A
If profits are maximised through cost cutting
Quality may be compromised
