buisness obj

Question 1

Profit satisficing

Answer 1

When a firm earn just enough profit to keep its’ shareholders happy

Question 2

CSR

Answer 2

when firms take responsibility for consequences on the enviro and behave more ethically

Question 3

Profit maximisation

Answer 3

Firms produce at a point which derives the greatest profit MR=MC

Question 4

Sales revenue max

Answer 4

Firms produce at a point which derives the greatest revenue MR=0

Question 5

Sales volume max

Answer 5

Firms produce at a point where they sell as many of their G&S as possible without making a loss AR=AC

Question 6

Growth max

Answer 6

Firms aim to increase the size of their market share eg. through mergers

Question 7

Utility max

Answer 7

firms aim to max social utility

Question 8

Principle agent problem

Answer 8

where the agent makes descisions on behalf of the principle
the agent SHOULD maximise the benefits of the principle BUT have the temptation of max their own benefits

Question 9

Conglomerate intergartion

Answer 9

The merger of firms witrh no common connection

Question 10

Horizontal intergration

Answer 10

Merger of firms in the same industry at the same stage of production

Question 11

Vertical intergration

Answer 11

when a firm merges or takes over another firm in the same industry but at a diff stage of production

Question 12

diversification

Answer 12

Firms grow by expanding their production ^ output, widening their customer base, developing a new product or diversifying their range

Question 13

TC

Answer 13

The cost to produce a given level of output

Question 14

TFC

Answer 14

Cost which don’t vary with output

Question 15

TVC

Answer 15

Costs that change with Output

Question 16

AC/ATC

Answer 16

the cost of production per unit

Question 17

Sunk costs

Answer 17

costs that can’t be recovered once they have been spent eg. Advertising, labour costs

Question 18

Law of diminishing returns

Answer 18

if a variable factor is ^ when another factor is fixed, there will be a point where each extra unit of the v factor will produce less extra output than the previous unit. after a certain point, marginal output falls

Question 19

Internal EoS

Answer 19

advantage that a firm is able to enjoy because of growth in the firm, independent of anything happening to other firms or the industry in general

Question 20

External EoS

Answer 20

An advantage which arises from the growth of the industry within which the firm operates, independent of the firm itself

Question 21

Eos

Answer 21

Advantages of large scale production that enable large buis to produce at a lower av cost than the smaller buis

Question 22

diseconomies of scale

Answer 22

disadvantage when large buis reduce efficiency and cause AC to rise

Question 23

Increasing returns to scale

Answer 23

^ in inputs by a certain proportion will lead to ^ in output by a larger proportion

Question 24

Decreasing returns to scale

Answer 24

^ in inputs by a certain proportion will lead to ^ in output by a a smaller proportion

Question 25

Constant returns to scale

Answer 25

Output ^ by same proportion that input ^ by

Question 26

min efficient scale

Answer 26

lowest level of output necessary to fully exploit EoS

Question 27

TR

Answer 27

Revenue generated from the scale of a given level of output

Question 28

AR

Answer 28

the price of each unit sold

Question 29

loss

Answer 29

when rev doesn’t occur

Question 30

Accounting profit

Answer 30

total monetary revenue minus total monetary costs

Question 31

Supernormal profit

Answer 31

above normal profit TR>TC

Question 32

Normal profit

Answer 32

min reward required to keep entrepeneurs supplying their enterprise, the return sufficient to keep FoP committed to the business
TR=TC

Question 33

Economic profit

Answer 33

profit which considers the op cost of production as well as the monetary cost

Question 34

why firms profit maximisation

Answer 34

Reinvestment- form of new tech, R&D, innovation
dividends (share of profit)for shareholders
lower costs& lower prices for customers
reward entrepreneurship

Question 35

Why firms may not profit max

Answer 35

have no knowledge of their MC&MR
to avoid scrutiny from competition authorities/regulators, they may investigate the business
key stakeholders could be harmed
other objs may be more appropriate

Question 36

Benefits of Revenue max

Answer 36

EoS- Revenue max quantity is greater than the profit max quantity
predatory pricing- Reva max price is lower than profit max price, firm undercuts rival, sacrificing profit to drive out competitors
Principle agent problem- Divorce between ownership and control

Question 37

why would firms use Sales/Growth maximisation

Answer 37

AC=AR
-EoS
-limit pricing, takes away incentive for other firms to enter market thus limiting competition
- Principle agent problem, divorce between ownership and control. Managers may use growth to help get them perks
-Flood the market, increases awareness of product so develops loyalty to product