objectives of firms

Question 1

profit maximising,why and issues

Answer 1

-they profit maximise
why:
re-investment
-dividends for shareholders (share of profit)
-lower costs and lower prices for consumers

but:
-knowledge of MC and MR
-greater scrutiny (regulators)
-key stakeholders harmed

Question 2

where is profit max

Answer 2

MR=MC

Question 3

profit satisficing and groups harmed

Answer 3

-satsificing profit to satisfy as many stakeholders

-consumers, workers, government, environmental groups

Question 4

revenue maximisation

Answer 4

-when MR=0

why:
economies of scale
predatory prising: a firm undercuts rival to drive out competitors
principle agent problem: divorce of ownership

Question 5

sale max

Answer 5

-AC=AR

why:
economies of scale
limit pricing
principle agent problem (use growth or sales to gain great perks)

Question 6

what is the principal agent problem

Answer 6

-when the objectives of company owners are not aligned with those of managers (i.e. aiming to boost profit to be rewarded with promotion or bonus)