3.2.1 Flashcards
1
Q
What is profit maximisaton?
A
When businesses seek to make the most profit possible.
2
Q
What’s revenue maximisation?
A
When businesses seek to make the most revenue possible.
3
Q
What’s sales maximisation?
A
When businesses seek to make the most sales possible.
4
Q
What’s the condition for profit to be maximised?
A
MC = MR
5
Q
What’s the condition for revenue to be maximised?
A
MR = 0
6
Q
What’s the condition for sales to be maximised?
A
AC = AR
7
Q
Draw a graph that shows profit being maximised
A
- Y axis is “MC/MR”
- X axis is “Output”
- Supply line labelled as MC
- Demand line labelled as MR
- Equilibrium line where MC and MR meet going down into a new graph
- New Y axis is profit
- New X axis is output
- Semi circle on top
8
Q
Draw a graph that shows revenue being maximised
A
- Y axis is MR
- X axis is output
- MR line at twice the gradient of regular demand line
- Equilibrium line into a new graph
- New Y axis is Total revenue
- New X axis is Output
- Semi circle on top
9
Q
Draw a graph that shows sales being maximised
A
- Y axis labelled as AC/AR
- X axis labelled as Output
- Equilibrium line
- “Q” where equilibrium line reaches the X axis
10
Q
What is satisficing?
A
When a firm is profit satisficing when it’s earning enough profit to keep its shareholders happy.
