The objectives of firms

Question 1

Profits

Answer 1

when total income or revenue for a firm is greater than total costs.

Question 2

Total revenue

Answer 2

what the firm receives for the sale of its product=price*no. sold

Question 3

Average revenue

Answer 3

total revenue/no. sold

Question 4

Marginal revenue

Answer 4

the addition to total revenue from the production of one extra unit.

Question 5

total profit

Answer 5

total revenue minus total costs.

Question 6

Normal profit

Answer 6

the amount required to keep a factor employed in its present activity in the long run.

Question 7

Profit maximisation

Answer 7

where a firm chooses a level of output where marginal revenue equals marginal costs.

Question 8

Supernormal profit

Answer 8

a return above normal profit-a surplus payment

Question 9

Sub-normal profit

Answer 9

profit below normal which should lead to the firms leaving the industry.

Question 10

Entrepreneur

Answer 10

individuals who organises the factors of production in order to make a profit

Question 11

Public Limited Company

Answer 11

a firm owned y a group o shareholders whose shares can be traded on the LONDON STOCK EXCHANGE.

Question 12

Corporation

Answer 12

a private enterprise firm incorporated with The Registrar of Companies.

Question 13

Director

Answer 13

an individual elected by a company’s shareholders to set corporate policies.

Question 14

Perks

Answer 14

non-monetary benefits like an expensive car provided by the firm.

Question 15

Dividends

Answer 15

financial return from the ownership of shares (equities) in a firm.

Question 16

Share options

Answer 16

the right to buy or seek stock at an agreed price.

Question 17

Annual General Meeting

Answer 17

annual meeting where shareholders can discuss the accounts and elect directors.

Question 18

Activitst shareholders

Answer 18

shareholders that will clamour for greater dividends and may mobilise other shareholders to oppose the management.

Question 19

Hostile bid

Answer 19

a bid to buy shares in an attempt to gain control of the firm which is opposed by the firms’s directors who fear job loss.

Question 20

Satisficing

Answer 20

the firm is producing satisfactory but not maximum profit.

Question 21

Stakeholders

Answer 21

firms, organisations or individuals with an interest in the firm

Question 22

Carbon footprint

Answer 22

the amount of greenhouse gases produced measured in terms of carbon dioxide

Question 23

Corporate citizenship

Answer 23

indicates that organisations embrace sustainable development.

Question 24

Market share

Answer 24

percentage of the total market eld by the company

Question 25

Market power

Answer 25

when a firm has the ability to exert significant influence over the quantity of goods traded or the price at which they are sold.

Question 26

Rational choice theory

Answer 26

where all costs and benefits are considered before a decision is taken.

Question 27

Capitol market discipline

Answer 27

where firms may be taken over by other firms if they appear to be making lower profits than their assets would suggest.

Question 28

Delisting

Answer 28

refers to the practice of removing the stock of a company from a stock exchange so that investors can no longer trade shares of the stock on that exchange.

Question 29

Innovation

Answer 29

turning invention into commercial use, introducing a new product or process.

Question 30

Horizontal integration

Answer 30

where two firms at the same stage of production combine.

Question 31

Vertical integration

Answer 31

where firms at different stages of production combine

Question 32

Conglomerate merger

Answer 32

where firms with no obvious connection combine.

Question 33

Lateral merger

Answer 33

a particular type of horizontal merger