Firms Objectives
Firms objectives in transport economics
- Created by: TessAni
- Created on: 18-01-13 12:16
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- Firms Objectives
- Profit Maximisation
- When marginal cost is equal to marginal revenue
- Increased profit can be made by expanding output
- When firms don't operate at the Profit Maximisation level of output...
- Large profits might attract attention from government watchdogs, damages employee relations and increase competition
- Sales Revenue Maximisation
- An objective where a firm produces where marginal revenue is zero - predatory pricing
- Short term way of driving out rivals - long term unsustainable
- Feature of growing markets
- Profits can still be earned if total revenue is greater than total costs
- Bus market
- Profit Satisficing
- Where a firm makes a reasonable level of profit that satisfies its stakeholders without maximising profit
- Could be because of the risks involved with profit maximisation
- Able to keep employees, customers and stakeholders happy - lower prices, higher wages
- Sales Maximisation
- An objective that involves the maximisation of the volume of sales
- Justified when there is cross-subsidisation
- A business practice where revenue from profitable activites is used to support loss-making ones
- Increase output where total revenue just covers total cost - highly inefficient
- Common with state-owned firms
- Profit Maximisation
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