busines objectives

Question 1

Profit formula

Answer 1

Profit = Total Revenue - Total costs

TR - TC

Question 2

at what point on the graph do firms profit maximise

Answer 2

at MC=MR

each extra unit produced cannot give any extra loss or revenue

Question 3

where is a firms break-even point (normal profit, non loss or gain) in a cost and revenue diagram

Answer 3

at TC=TR

Question 4

when do profits increase and decrease

Answer 4

profits increase when MC < MR
profits decrease when MC > MR

Question 5

why do firms choose to profit maximise

Answer 5

• greater wages + dividends for entrepreneurs
• retained profits are a cheap ice for finance - saves paying high interest rates for loans
• in short run the owners or shareholders goal is to profit maximise (maximise gain from company)
• some firms profit maximise as consumers don’t like rapid price changes in short run - this provides scale price + output

Question 6

at what point does revenue maximisation occur in cost and revenue diargram

Answer 6

at MR=0

each extra unit of a good sold generate no extra revenue

Question 7

why do firms revenue maximise

Question 8

at what point does the cost and revenue diagram does sales maximisation occur

Answer 8

at AC=AR

firs sells as much of their goods + services as possible without making loss

(no profit made either)

Question 9

why do firms sales maximise

Answer 9

• not for profit organisation might work at this output and price
• example is Amazon’s kindle launch - sold as many as possible to gain market share
• to make profit in the long run
• keeps out and deters competitors

Question 10

profit satisficing

Answer 10

this is when a firm is earning just enough profits to keep its shareholders happy