LS6

Question 1

What are a businesses objectives?

Answer 1

Profit/revenue maximisation
Sales maximisation 
Managerial utility maximisation 
Satisficing
Corporate social responsibility

Question 2

Where is revenue maximisation point?

Answer 2

Peak of the TR curve when MR=0

However maximising revenue means lower price charged and not most profit

Question 3

Where is sales maximisation?

Answer 3

Where TR=TC and AR=AR so normal profit is made
Highest level of sustainable output in the long run but not most profit
Shareholders may not agree

Question 4

What is managerial utility maximisation ?

Answer 4

When management is separated from ownership so managers look to maximise their own utility like higher salary, personal projects
However this cuts into profits
Shareholders can remove managers

Question 5

What is satisficing?

Answer 5

A large enterprise has separate groups with objectives which can conflict
Doesn’t allow firms to maximise so have to compromise
So must do enough to just satisfy everyone like pay shareholders

Question 6

What is corporate social responsibility?

Answer 6

Profit leads to consequences for society so they have a social responsibility and also need to maintain a good image

Question 7

What harm do firms do?

Answer 7

Pollute with no consequences
Unethical actions like child labour, poor working conditions, low pay
Leads to negative image so less sales and revenue

Question 8

What are some socially beneficial activities?

Answer 8

Use sustainable resources, avoid polluting activities, support charities and groups, local suppliers
Leads to increased revenue

Question 9

Evaluation for corporate social responsibility?

Answer 9

Cutting costs by using cheap labour leads to higher profits but this could lead to lower revenue if consumers avoid buying
But being socially is costly and leads to less profit
So being socially and ethically responsible may lead to lower or higher profits