Objectives Of Firms

Question 1

What is point is where profit maximisation occurs and what are evaluation points?

Answer 1

MR=MC Eval: it can be difficult to pinpoint exact values for MC, also what do firms do once the level of output where MR=MC has been reached?

Question 2

At what point does revenue maximisation occur?

Answer 2

MR=0, firms are willing to sell products until the last unit sold adds nothing to total revenue, knowing that the next unit sold will reduce revenue.

Question 3

At what point does sales maximisation occur?

Answer 3

AC=AR, selling the most subject to the constraint of making normal profits.

Question 4

What behaviour does a firm exhibit if it undertakes satisficing?

Answer 4

A firm will make enough profit to satisfy shareholders, leaving it to pursue other objectives. For example managers may decide to pursue revenue maximisation as their bonuses’ are related to how much revenue they generate.