3.2.1

Question 1

What are the key business objectives?

Answer 1

-Profit maximisation
-Sales maximisation
-Revenue maximisation
-satisficing behaviour

Question 2

When does profit maximisation occur?

Answer 2

At an output where marginal revenue = Marginal cost

Question 3

What does the change in revenue from producing an extra unit of output equal?

Answer 3

The change in cost from producing an extra unit.

Question 4

What are the benefits of a business aiming to maximise profits rather than purse alternative objectives?

Answer 4

-Shareholders are likely to benefit from higher dividends
-Employees may gain if pay is linked to profitability
-Increased capital investment spending
-Profits into R&D leading to dynamic efficiency
-Safety net

Question 5

What are the drawbacks of a business aiming to maximise profits rather than purse alternative objectives?

Answer 5

-Higher prices for final consumers
-Incentive for new firms to enter the market
-Lose sight of social/ethical/ environmental aspect of businesses
-It profits are increased by pushing costs lower quality may be impacted

Question 6

What is profit maximisation?

Answer 6

Profits are maximised at an output level where marginal cost = marginal revenue

Question 7

What is revenue maximisation?

Answer 7

Revenues are maximised at an output where marginal revenue = zero

Question 8

What is sales maximisation?

Answer 8

Supplying the largest ouput possible consistent with earning at least normal profits where AR = AC

Question 9

What is satisficing behaviour?

Answer 9

Satisficing involves the owners of a business setting minimum acceptable levels of achievment of either revenue or operating profits