TOPIC 3 Flashcards
At what point does profit max occur?
Where MC=MR
Where do firms break even?
Where TR=TC
Why do firms profit maximise?
To provide the greatest wages/ dividend for entrepreneurs
What is normal profit?
The minimum reward required to keep entrepreneurs supplying the business
What is supernormal profit?
Profit above the minimum amount required to keep entrepreneurs investing
At what point does sales revenue maximisation occur?
Where MR=0
At what point does sales volume maximisation occur?
AC=AR
What are the two types of growth maximisation?
1) firms aim to increase the size of their business through economies of scale or mergers/takeovers
2) firms aim to increase their market share and chance of survival
What is utility maximisation?
Maximisation for consumers where they aim to generate the greatest utility possible
What is profit-satisficing?
When firms make just enough profit to keep shareholders happy
What is social welfare/ corporate social responsibility objectives?
Where the firm aims to maximise social welfare and work ethically
What is the formula for average costs?
TC / Q
What is the difference between long term and short term in regards to costs?
In the short run, some costs are fixed but in the long run all costs are variable
What is the law of diminishing returns?
Adding more inputs initially increases the output, until a certain point where marginal returns begin to fall
What is returns to scale?
The effect on long run returns as the scale of production increases
