Buisness Objectives Flashcards

1
Q

Definition of business objectives

A

The reasons behind the decisions firm take

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2
Q

Define profit maximisation

A

Main assumption for firms to achieve the highest level of profits possible: where MR:MC

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3
Q

Define sales maximisation

A

Producing where AR=AC, highest possible output a firm can sustain in the Long run

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4
Q

Define revenue maximisation

A

Producing where MR=O, keep producing more output as long as it adds to revenue

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5
Q

Define Marginal analysis

A

An examination of effect in current situation

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6
Q

Law of diminishing returns

A

in the DR when variable FoP are added to a stock of fixed FoP, total/marginal product will initially rise then fall

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7
Q

Explicit costs

A

costs that require actual payments eg, fixed and variable

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8
Q

Implicit costs

A

Opportunity costs

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8
Q

Fixed costs definition

A

do not vary with output

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9
Q

Variable costs

A

costs that vary with output

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10
Q

Fixed costs examples

A

advertising, salaries, rent, loans, interest, business rates

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11
Q

Variable costs examples

A

Wages, utility bills, Raw material costs, transport goods

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12
Q

TFC equation

A

TFC=TC-TVC or AFCxQ

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13
Q

AFC equation

A

TFC/ Q or AC-AVC

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14
Q

MC equation

A

Change in TC/ Change in Q

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15
Q

AC equation

A

TC/ Q

16
Q

TC equation

A

TFC+TVC

17
Q

how to calculate increasing returns to scale

A

% change output> % change in inputs

18
Q

Minimum efficient scale

A

lowest level of output required to exploit full economies of scale

19
Q

Economies of scale def

A

a reduction in LRAC as output increases

20
Q

Two groups of EoS

A

internal EoS and External Eos

21
Q

What is internal Eos

A

within a business’s control, a business can exploit them as they get larger

22
Q

Internal EoS

A

Risk bearing
Financial
Managerial
Technical
Marketing
Purchasing

23
Q
A