CHAPTER 53 BUSINESS OBJECTIVES

Question 1

Consumer sovereignty

Answer 1

Exists when the economic system allocates resources totally according to the preferences of consumers.

Question 2

Cost-plus pricing

Answer 2

The technique adopted by firms of fixing a price for their products by adding a fixed percentage profit margin to the long-run average cost of production.

Question 3

Profit Maximisation

Answer 3

Occurs when the difference between total revenue and total cost is greatest.

Question 4

Profit satisficing

Answer 4

Making sufficient profit to satisfy the demands of owners, such as shareholders.

Question 5

Revenue maximization

Answer 5

Occurs when total revenue is highest and when marginal revenue equals zero.

Question 6

Sales maximization

Answer 6

Occurs when the volume of sales is greatest; when the objective of a firm, this is usually subject to a profit satisficing constraint.