Motives of the Firm -unit 3 Flashcards
Where does revenue max occur
When MR = 0
Why do firms profit max
Satisficing behaviour
Why do firms sales max
To gain market share
Why do firms revenue max
To make sufficient profit to satisfice shareholders
What is predatory pricing and the short/long run effects
Pricing below costs to drive out other firms
Short run - loss
Long run - other firms leave so prices are raised to levels that would not have been possible with competition b
What is limit pricing.
Pricing at a low enough level to discourage entry of new firms.
Achieved through economies of scale
Give examples of non pricing strategies
Advertising Investment in branding Packaging Customer service Warranties Mergers to reduce competition
Where does profit max occur
When mc = Mr
Where does sales max occur
When ac = ar
What is Satisficing behaviour
Just enough profit to keep stake holders happy, allowing for other motives to be pursued
What is a stakeholder
People who have vested an interest in the form and include shareholders. Employees, managers, customers, suppliers, governments and trade unions
