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Economics > Business objectives > Flashcards

Business objectives Flashcards

unit 1.1.2

1
Q

What are the 3 main objectives for firms ?

A
  1. profit maximisation
  2. sales maximisation
  3. satisficing
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2
Q

What does marginal mean ?

A

the next unit

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3
Q

What is profit maximisation ?

A

the traditional firm theory aiming to maximise profits
when a firm operates at a price and output that produces the greatest amount of profit

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4
Q

What is the formula for profit ?

A

total revenue - total cost

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5
Q

What is the formula for break even ?

A

total revenue = total cost

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6
Q

What is profit ?

A

the reward entrepreneurs yield when they take risks

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7
Q

What is the formula for profit maximisation ?

A

marginal cost = marginal revenue

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8
Q

When does profit increase ?

A

when MR > MC

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9
Q

When does profit decrease ?

A

when MC > MR

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10
Q

What are the positives of profit maximisation ?

A

greater wages and dividends and being able to retain profits

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11
Q

Why is profit maximisation important in the short term ?

A

it would be good for owners and shareholders

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12
Q

Why is profit maximisation important in the long term ?

A

it is less likely for prices to change for consumers

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13
Q

What is sales maximisation ?

A

when a firm aims to sell as much as possible without making a loss e.g not for profits

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14
Q

What is the formula for sales maximisation ?

A

avg cost = avg revenue

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15
Q

What is profit satisficing ?

A

a more ethical way where they earn just enough profit to keep shareholders happy

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16
Q

Why might managers not aim for high profit when satisficing ?

A

to keep a happy workforce and to focus on other objectives

17
Q

What is a divorce of ownership and control ?

A

conflict between shareholders and managers

18
Q

Where does a divorce of ownership and control occur

A

in larger firms

19
Q

What are some other objectives ? (Suck My Extra Red Extra Cummy Sack)

A

survival
market share
efficiency (cost)
ROI
employee welfare / welfare of labour force
customer satisfaction
social welfare (CSR)

20
Q

What is market share

A

% of the market

21
Q

What is being cost efficient ?

A

being able to charge lower prices due to lower average costs - linking to sales maximisation

22
Q

What is ROI ?

A

the reward for risk is profit, which is the ROI - the larger the ROI the more attractive it is to invest

23
Q

What is social welfare (CSR) ?

A

the giving back to the local area ethically or environmentally maybe if it is a philanthropic owner

24
Q

What is a philanthropic owner ?

A

a pillar of society who gives back

Economics (12 decks)

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