Objectives of Firms Flashcards
Why do some firms adopt profit satisficing?
This occurs due to the separation of ownership and management. Due to imperfect information, managers may aim for a minimum level of profit that is just enough to satisfy the owners rather than maximise profits.
Why do some firms adopt revenue maximisation?
This can be also due to the separation of ownership as his job performance might be measured by how much revenue he made. This means costs is not taken into consideration and if costs outweighs revenue, the firm owner might suffer a fall in profit.
Why do some firms focus on market share dominance?
A firm could choose to focus on preserving as well as enlarging its market share at the expense of its profits through pricing strategies in order to make its demand more price inelastic.
What is short run production?
Short run production is when there is at least 1 fixed factor input.
What is long run production?
Long run production is when all factor inputs can be varied.
Define Internal Economies of Scale.
Internal Economies of Scale refers to unit cost reductions that accrue to a firm as a result of expanding the firm’s scale of production.
