MYTUTOR SUBJECT ANSWERS

539 views

What are the objectives of a firm?

A firm can have a number of objectives some of which can carry drawbacks. (All these objectives can also be accompanied with diagrams.)

1.Profit Maximisation ( at the point MC=MR)

this keeps shareholders happy, provides reinvestment opportunities, and create greater efficiency for the firm. 

BUT 

the point where marginal costs (MC) are equal to marginal revenue (MR) is difficult to calculate as MC includes physical costs and the opportunity cost- which is hard to quantify.

Additionally firms have greater risk of investigations by regulatory authorities if huge profits are being made.

2. Profit satisficing- which occurs when there is a divorce of ownership of control. So firms have to profit satisfice; make a level of profit which satisfies all stakeholders.

3. Survival e.g. this is typical of firms in the transport sector where there are high fixed costs to set up due to competition in the industry; so survival is good enough.

4. Revenue Maximisation (MR=0)

e.g. predatory pricing due to competition in the industry ( price driven down; this drives out competion and quantity driven down; as firms grow in size they may benefit slightly from economies of scale)

4. Sales maximisation (AC=AR)

can occur when a firm is concerned about producing as much as possible and maximising the size of the business.

evaluation summry; 

show why profit max. may not work

other objectives (often due to conflicts between short term and long term goals)

highlight the growth versus profit conflict.

(remember to give examples to show application skills too)

Sarswati L. GCSE Economics tutor, A Level Economics tutor, 13 Plus  E...

9 months ago

Answered by Sarswati, an A Level Economics tutor with MyTutor


Still stuck? Get one-to-one help from a personally interviewed subject specialist

64 SUBJECT SPECIALISTS

£22 /hr

Xenia K.

Degree: Law (Bachelors) - Durham University

Subjects offered:Economics, English Literature+ 2 more

Economics
English Literature
-Personal Statements-

“Hello :) My name is Xenia and I'm a law student at Durham University. Though I absolutely love my course I'll always have a soft spot in my heart for Economics and Literature and can't wait to share that love with you.  My teaching ph...”

£20 /hr

Dan W.

Degree: Economics and Accounting (Bachelors) - Bristol University

Subjects offered:Economics, Maths

Economics
Maths

“I achieved top grades whilst juggling cricket at a high level. I’ve tutored for Young Einstein Tuition & been a Peer Mentor to those facing personal issues”

£20 /hr

Thomas B.

Degree: Economics (Bachelors) - Nottingham University

Subjects offered:Economics, Maths+ 3 more

Economics
Maths
Graphic Design
Extended Project Qualification
English

“Economics Undergraduate at the University of Nottingham. Looking to help make a difference!”

MyTutor guarantee

About the author

Sarswati L.

Currently unavailable: for new students

Degree: Economics (Bachelors) - Bristol University

Subjects offered:Economics, Maths+ 2 more

Economics
Maths
Latin
-Personal Statements-

“About me   I am an Economics Student at The University of Bristol. I love the subject as it's so dynamic and it's interesting to see real world application of theories and models we learn in current and past events. I really enjoy th...”

Trusted by schools

|  135 completed tutorials

You may also like...

Posts by Sarswati

What are the objectives of a firm?

What is the purpose of the gerundive case?

Other A Level Economics questions

What is the difference between external and internal economies of scale?

What is inflation and how is it measured? (Including evaluation)

What is the best market structure?

The government has introduced an ad valorem tax on petrol. The likely effect is: A) Increase in sales of petrol B) Increase in carbon emissions from electric cars C) Increase in demand for bus travel D) Decrease in sale of electric cars

View A Level Economics tutors

We use cookies to improve your site experience. By continuing to use this website, we'll assume that you're OK with this. Dismiss

mtw:mercury1:status:ok