L6- Business Objectives

Question 1

Business objectives

Answer 1

• profit maximisation
• sales maximisation
  -revenue maximisation
  -managerial utility maximisation
  -satisficing

Question 2

How do firms maximise profits?

Answer 2

• choose output level farthest above total cost curve as possible- q*
• draw 3 relevant diagrams
• if it has no pricing power- MR stays same ( receives same revenue from sale of each unit of good’- profit max. at MC=MR
• with pricing power= reverse U